Travel & Leisure Co. (TNL)

ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

BUSINESS AND OVERVIEW

We are a global provider of hospitality services and travel products and operate our business in the following two segments:

•Vacation Ownership — develops, markets, and sells vacation ownership interests (“VOIs”) to individual consumers, provides consumer financing in connection with the sale of VOIs, and provides property management services at resorts. This segment is wholly comprised of our Vacation Ownership business line.

•Travel and Membership — operates a variety of travel businesses, including vacation exchange brands, travel technology platforms, travel memberships, and direct-to-consumer rentals. This segment is comprised of our Exchange and Travel Club business lines.

Economic Conditions and Key Business Trends

During 2024, our business saw strong demand for leisure travel which resulted in higher tours and Gross VOI sales at our Vacation Ownership business, as compared to the prior year. Our volume per guest (“VPG”) also continued to perform above pre-pandemic levels, despite VPG levels moderating in response to our strategic shift to increase our mix of new owners, which generally produce lower VPGs and lower close rates. This strategic shift was made to grow our pipeline of potential future owner upgrade sales.

The 2024 full-year results also reflect the impact of cost savings realized as a result of the strategic realignment of our Travel and Membership segment at the end of 2023 and the implementation of additional cost saving initiatives at this segment in the third quarter of 2024. As a result of these cost saving initiatives we saw an increase in net income and Adjusted EBITDA at this segment despite a decrease in revenue as compared to the prior year. The Travel and Membership segment was also benefited by pricing increases which led to higher revenue per transaction and served to partially offset the impact of lower transactions, as compared to the prior year. Lower transactions compared to the prior year were primarily the result of an increasing mix of exchange members with a club affiliation, who have a lower transaction propensity.

While we continue to benefit from the changes we made to our marketing criteria to strengthen sales efficiencies and improve the performance of our vacation ownership contract receivables (“VOCR”) portfolio, similar to a number of other companies, we are experiencing some pressure on our loan portfolio primarily due to an increase in delinquencies. We have also taken steps to increase the percentage of developer-financed sales since 2022 with the goal of accelerating growth in our consumer financing revenues, while also balancing our portfolio performance.

While we are experiencing the benefits of positive demand trends, the sustained effects of inflationary pressures over time, high interest rates, and risk of recession inherently result in uncertainty in business trends and consumer behavior. Although higher interest rates negatively impacted our interest expense during 2024, we have begun to experience improvements in the capital markets. We closed on three term securitizations during 2024 with lower blended interest rates and higher advance rates than our securitizations in 2023, with our last securitization of the year closing with the lowest coupon rate and advance rate we have achieved in over two years. Additionally, during the fourth quarter of 2024, we repriced and replaced the $593 million outstanding balance on the 2023 Incremental Term Loan B facility and refinanced the $282 million outstanding balance on the 2018 Term Loan B facility, which will provide future interest savings. We also expect benefits in the interest on our floating rate debt as a result of the Federal Reserve benchmark interest rate reductions, which totaled 100 basis points in the second half of 2024.

Our Vacation Ownership business is benefited by the fact that the majority of our owners do not have loans and are therefore less dependent on economic conditions when making travel decisions, which provides opportunities for upgrade sales. This business, and, to a greater extent, our Travel and Membership businesses are highly dependent on the health of the travel industry and we are subject to the other risks and uncertainties discussed in “Risk Factors” contained in Part I, Item 1A of this Annual Report on Form 10-K.

Accor Vacation Club Acquisition

On March 1, 2024, we acquired Accor Vacation Club for $50 million ($44 million net of cash acquired). Accor Vacation Club represents 24 resorts and nearly 30,000 members. This acquisition was undertaken to help the two companies establish a relationship to develop new timeshare products in the Asia Pacific, Middle East, Africa, and Türkiye regions under the Accor Vacation Club brand, leveraging the Travel + Leisure Co. global platform. Accor receives a percentage of vacation ownership sales revenue as a licensing fee under the exclusive licensing agreement and we receive the exclusive right to develop new vacation ownership clubs and products in the aforementioned regions, utilizing the Accor Vacation Club brand. This acquisition

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is included within the Vacation Ownership segment. See Note 5—Acquisitions to the Consolidated Financial Statements for additional details.

Sports Illustrated Resorts

On September 11, 2023, we entered into an agreement to acquire the rights to the vacation ownership business of Sports Hospitality Ventures, LLC (“SHV”), and introduced a new concept for a network of sports-themed resort and lifestyle complexes in popular college towns and leisure destinations under the Sports Illustrated Resorts brand. The new resorts are anticipated to be developed using an asset-light development financing model. We are still early in the development of the Sports Illustrated Resorts portfolio but expect to begin sales within the next 9 to 18 months. This new product line is included within the Vacation Ownership segment. There is no immediate earnings impact for us, but we expect this business to drive incremental growth starting in 2026.

Pillar Two

The Organization for Economic Co-operation and Development (“OECD”), continues to put forth various initiatives, including Pillar Two rules which include the introduction of a global minimum tax at a rate of 15%. European Union member states agreed to implement the OECD’s Pillar Two rules with effective dates of January 1, 2024 and January 1, 2025, for different aspects of the directive and most have already enacted legislation. A number of other countries have also implemented similar legislation. As of December 31, 2024, based on the countries in which we do business that have enacted legislation effective January 1, 2024, the impact of these rules to our financial statements was not material. For the rules effective January 1, 2025, we do expect the impact to increase our effective tax rate but overall the rules are not expected to have a material impact on our financial statements. This may change as other countries enact similar legislation and further guidance is released. We continue to closely monitor regulatory developments to assess potential impacts.

SEGMENT OVERVIEW

Vacation Ownership

We develop, market, and sell VOIs to individual consumers, provide consumer financing in connection with the sale of VOIs, and provide property management services at resorts. Our sales of VOIs are either cash sales or developer-financed sales. Developer-financed sales are typically collateralized by the underlying VOI. Revenue is recognized on VOI sales upon transfer of control, which is defined as the point in time when a binding sales contract has been executed, the financing contract has been executed for the remaining transaction price, the statutory rescission period has expired, and the transaction price has been deemed to be collectible.

For developer-financed sales, we reduce the VOI sales transaction price by an estimate of uncollectible consideration at the time of the sale. Our estimates of uncollectible amounts are based largely on the results of our static pool analysis which relies on historical payment data by customer class.

We leverage a number of different tools to impact the percentage of developer-financed sales, such as offering credit cards and other third-party financing directly to consumers to facilitate cash down payments and sales while balancing our consumer default risk profile.

In connection with entering into a VOI sale, we may provide our customers with certain non-cash incentives, such as credits for future stays at our resorts. For those VOI sales, we allocate the sales price between the VOI sale and the non-cash incentive. Non-cash incentives generally have expiration periods of two years or less and are recognized at a point in time upon transfer of control.

We provide day-to-day property management services including oversight of housekeeping services, maintenance, and certain accounting and administrative services for property owners’ associations and clubs. These services may also include reservation and resort renovation activities. The initial terms of the property management agreements are generally between three to five years; however, the vast majority of the agreements provide a mechanism for an automatic one year renewal upon expiration of the terms. Our management agreements contain cancellation clauses, which allow for either party to cancel the agreement, by either a majority board vote or a majority vote of non-developer interests. We receive fees for such property management services which are collected monthly in advance and are based upon total costs to operate such resorts (or as services are provided in the case of resort renovation activities). Fees for property management services typically approximate 10% of budgeted operating expenses. We are entitled to consideration for reimbursement of costs incurred on behalf of the property owners’ association in providing management services (“reimbursable revenue”). These reimbursable costs principally relate to the payroll costs for management of the associations, club and resort properties where we are the employer and are reflected as a component of Operating expenses on the Consolidated Statements of Income. We reduce our management fees revenue for amounts paid to the property owners’ association that reflect maintenance fees for VOIs for which we retain ownership, as we

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have concluded that such payments are consideration payable to a customer. Property management fee revenues and reimbursable revenues are recognized when the services are performed and are recorded as a component of Service and membership fees on the Consolidated Statements of Income.

Within our Vacation Ownership segment, we measure operating performance using the following key operating statistics: (i) gross VOI sales including sales under our Fee-for-Service program before the effect of loan loss provisions, (ii) tours, which represents the number of tours taken by guests in our efforts to sell VOIs, and (iii) volume per guest, which measures the efficiency of this business’ efforts in generating sales from tours, is calculated by dividing the gross VOI sales (excluding telesales and virtual sales) by the number of tours. We have excluded non-tour sales in the calculation of VPG because they are generated by a different marketing channel.

Travel and Membership

We derive a majority of our revenues from membership dues and fees for facilitating members’ trading of their timeshare intervals. Revenues from membership dues represent the fees paid by members or affiliated clubs on their behalf. As a provider of vacation exchange services, we enter into affiliation agreements with developers of vacation ownership properties to allow owners of VOIs to trade their intervals for intervals at other properties affiliated with our vacation exchange network and, for some members, for other leisure-related services and products. We recognize revenues from membership dues paid by the member on a straight-line basis over the membership period as the performance obligations are fulfilled through delivery of publications, if applicable, and by providing access to travel-related products and services. Estimated net contract consideration payable by affiliated clubs for memberships is recognized as revenue over the term of the contract with the affiliated club in proportion to the estimated average monthly member count. Such estimates are adjusted periodically for changes in the actual and forecasted member activity. For additional fees, members have the right to exchange their intervals for intervals at other properties affiliated with our vacation exchange networks and, for certain members, for other leisure-related services and products. We also derive revenue from facilitating bookings of travel accommodations that were acquired from various sources. Revenue is recognized when these transactions have been confirmed, net of expected cancellations.

Our vacation exchange business also derives revenues from programs with affiliated resorts, club servicing, and loyalty programs; and additional exchange-related products that provide members with the ability to protect trading power or points, extend the life of deposits, and combine two or more deposits for the opportunity to exchange into intervals with higher trading power. Revenues from other vacation exchange related product fees are deferred and recognized upon the occurrence of a future exchange, event, or other related transaction.

We earn revenue from our RCI Elite Rewards co–branded credit card program, which is primarily generated by cardholder spending and the enrollment of new cardholders. The advance payments received under the program are recognized as a contract liability until our performance obligations have been satisfied. The primary performance obligation for the program relates to brand performance services. Total contract consideration is estimated and recognized on a straight-line basis over the contract term.

Within our Travel and Membership segment, we measure operating performance using the following key operating statistics: (i) average number of exchange members, which represents paid members in our vacation exchange programs who are considered to be in good standing; (ii) transactions, which represents the number of exchanges and travel bookings recognized as revenue during the period, net of cancellations; and (iii) revenue per transaction, which represents transaction revenue divided by transactions. Transactions and revenue per transaction are provided in two categories: Exchange, which is primarily RCI, and Travel Club.

Other Items

We record property management service revenues for our Vacation Ownership segment and RCI Elite Rewards revenues for our Travel and Membership segment gross as a principal.

RESULTS OF OPERATIONS

We have two reportable segments: Vacation Ownership and Travel and Membership. The reportable segments presented below are those for which discrete financial information is available and which are utilized on a regular basis by the chief operating decision maker to assess performance and to allocate resources. In identifying our reportable segments, we also consider the nature of services provided by the operating segments. Management uses Adjusted EBITDA to assess the performance of the reportable segments. During the third quarter of 2024, we updated our definition of Adjusted EBITDA to exclude certain non-recurring costs directly incurred to integrate mergers and/or acquisitions into the existing business as these costs do not reflect recurring operating expenses. This change was made as a result of our acquisition of Accor Vacation Club. As this business is being further integrated into our operations, it has begun incurring certain discrete non-recurring costs directly attributable to

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integration activities and we believe excluding these types of costs would assist investors in understanding our ongoing performance when considered with generally accepted accounting principles in the U.S. (“GAAP”) measures. We define Adjusted EBITDA as net income from continuing operations before depreciation and amortization, interest expense (excluding consumer financing interest), early extinguishment of debt, interest income (excluding consumer financing revenues) and income taxes. Adjusted EBITDA also excludes stock-based compensation costs, separation and restructuring costs, legacy items, transaction and integration costs associated with mergers, acquisitions, and divestitures, asset impairments/recoveries, gains and losses on sale/disposition of business, and items that meet the conditions of unusual and/or infrequent. Legacy items include the resolution of and adjustments to certain contingent assets and liabilities related to acquisitions of continuing businesses and dispositions, including the separation of Wyndham Hotels & Resorts, Inc. (“Wyndham Hotels”) and Avis Budget Group, Inc. (“ABG”) formerly Cendant Corporation, and the sale of the vacation rentals businesses. We believe that Adjusted EBITDA is a useful measure of performance for our segments which, when considered with GAAP measures, we believe gives a more complete understanding of our operating performance. Our presentation of Adjusted EBITDA may not be comparable to similarly-titled measures used by other companies.

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OPERATING STATISTICS

The table below presents our operating statistics for the years ended December 31, 2024 and 2023. These operating statistics are the drivers of our revenues and therefore provide an enhanced understanding of our businesses. Refer to “The Year Ended December 31, 2024 vs. The Year Ended December 31, 2023” section for a discussion of how these operating statistics affected our business for the periods presented.

(a)Includes the impact of acquisitions from the acquisition dates forward.

(b)Represents total sales of VOIs, including sales under the Fee-for-Service program, before the effect of loan loss provisions. We believe that Gross VOI sales provides an enhanced understanding of the performance of our Vacation Ownership business because it directly measures the sales volume of this business during a given reporting period.

(c)Represents the number of tours taken by guests in our efforts to sell VOIs.

(d)VPG is calculated by dividing Gross VOI sales (excluding telesales and virtual sales) by the number of tours. We have excluded non-tour sales in the calculation of VPG because they are generated by a different marketing channel. We believe that VPG provides an enhanced understanding of the performance of our Vacation Ownership business because it directly measures the efficiency of this business’ efforts in generating sales from tours during a given reporting period.

(e)Represents the number of exchanges and travel bookings recognized as revenue during the period, net of cancellations.

(f)Represents transaction revenue divided by transactions.

(g)Represents paid members in our vacation exchange programs who are considered to be in good standing.

(h)Percentage change may not calculate due to rounding.

(i)The following table provides a reconciliation of Vacation ownership interest sales, net to Gross VOI sales (in millions):

(1)     Represents total sales of VOIs through our Fee-for-Service programs where inventory is sold through our sales and marketing channels for a commission. Fee-for-Service commission revenues were $71 million and $131 million for the years ended December 31, 2024 and 2023. These commissions are reported within Service and membership fees on the Consolidated Statements of Income.

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THE YEAR ENDED DECEMBER 31, 2024 VS. THE YEAR ENDED DECEMBER 31, 2023

Our consolidated results are as follows (in millions):

Net revenues increased $114 million during 2024 compared with 2023. This increase was unfavorably impacted by foreign currency of $3 million (0.1%). Excluding the impacts of foreign currency, the increase in net revenues was primarily due to:

•$131 million of increased revenues at our Vacation Ownership segment primarily due to an increase in net VOI sales as a result of increased tours, partially offset by a decrease in VPG due to a higher new owner transaction mix which generally produce lower VPGs; higher property management revenues resulting from higher property management fees and reimbursable revenues; and an increase in consumer financing revenues primarily due to a higher average portfolio balance; partially offset by a decrease in commission revenues due to lower volume of VOI Fee-for-Service sales as a result of fewer commitments. This increase in revenues was partially offset by

•$14 million of decreased revenues at our Travel and Membership segment primarily due to a decrease in transaction revenue driven by lower transactions and an increasing mix of exchange members with a club affiliation who have a lower transaction propensity, partially offset by higher revenue per transaction resulting from price increases.

Expenses increased $103 million during 2024 compared with 2023. This increase in expenses was favorably impacted by foreign currency of $3 million (0.1%). Excluding the impacts of foreign currency, the increase in expenses was primarily the result of:

•$64 million increase in sales and commission expenses at the Vacation Ownership segment due to higher Gross VOI sales, net of Fee-for-Service sales;

•$43 million increase in marketing costs primarily due to an increase at our Vacation Ownership business in support of increased tour flow and new owner mix, partially offset by cost savings at the Travel and Membership segment;

•$29 million increase in property management expenses due to higher reimbursable resort operating costs and expenses;

•$24 million increase in consumer financing interest expense primarily due to a higher average non-recourse debt balance and increased weighted average coupon rate; and a

•$21 million increase in general and administrative expenses driven by variable compensation and other employee related costs.

These increases were partially offset by:

•$39 million decrease in the cost of VOIs sold primarily due to product mix, partially offset by increased sales volume;

•$39 million decrease in sales and commission expense for VOI Fee-for-Service sales due to lower volume; and a

•$10 million decrease in restructuring costs.

We recognized a loss on sale of business of $2 million during 2023 resulting from the sale of the Love Home Swap business.

Interest expense decreased $2 million during 2024 compared with 2023 primarily due to a lower average outstanding balance on corporate debt, partially offset by a higher weighted average interest rate on corporate borrowings.

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Other income, net of other expense increased $12 million during 2024 compared with 2023, primarily due to a $7 million reduction in the fair value of contingent consideration associated with business acquisitions.

Our effective tax rates were 26.4% and 19.4% for the years ended December 31, 2024 and 2023. Our effective tax rate for 2023 is lower primarily due to the partial reversal of the valuation allowance related to our foreign tax credits based on our determination that it is more likely than not that the benefit will be realized.

Gain on disposal of discontinued business, net of income taxes increased $28 million during 2024 compared with 2023 driven by the release of expired guarantees of $32 million, net of tax in 2024, related to the sale of the European vacation rentals business.

As a result of these items, Net income attributable to Travel + Leisure Co. shareholders increased $15 million in 2024 as compared with 2023.

The tables below present our segment information (see Note 23—Segment Information to the Consolidated Financial Statements for a breakout of significant expenses related to our reportable segments), followed by a discussion of each segment’s 2024 results compared to 2023 (in millions):

(a)Includes the elimination of transactions between segments.

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(b)Includes $1 million of stock-based compensation expense during 2024 associated with the 2022 restructuring plan and $2 million of stock-based compensation expense during 2023 associated with the 2023 restructuring plan.

(c)Includes $1 million of inventory impairments for the year ended December 31, 2023, included within Cost of vacation ownership interests on the Consolidated Statements of Income.

Vacation Ownership

Net revenues increased $130 million and Adjusted EBITDA increased $35 million during 2024 compared with 2023. The net revenue and Adjusted EBITDA growth were not materially impacted by foreign currency.

The net revenue growth excluding the impact of foreign currency was primarily driven by:

•$224 million increase in Gross VOI sales, net of Fee-for-Service sales, due to an 8.0% increase in tours, partially offset by a 1.1% decrease in VPG due to a higher new owner transaction mix (35% in the current year compared to 33% in the same period of 2023) which generally produce lower VPGs;

•$32 million increase in property management revenues primarily due to higher management fees and reimbursable revenues; and a

•$23 million increase in consumer financing revenues primarily due to a higher average portfolio balance.

These increases were partially offset by a $84 million increase in our provision for loan losses primarily due to higher Gross VOI sales, net of Fee-for-Service sales and a higher provision rate resulting from a slight elevation in delinquencies and defaults, and a $63 million decrease in commission revenues due to lower volume of VOI Fee-for-Service sales as a result of fewer commitments.

In addition to the revenue change explained above, Adjusted EBITDA was further impacted by:

•$64 million increase in sales and commission expenses due to higher Gross VOI sales, net of Fee-for-Service sales;

•$56 million increase in marketing costs in support of increased tour flow and new owner mix;

•$29 million increase in property management expenses due to higher reimbursable resort operating costs and expenses; and a

•$24 million increase in consumer financing interest expense primarily due to a higher average non-recourse debt balance and increased weighted average coupon rate.

These increases were partially offset by a $39 million decrease in the cost of VOIs sold primarily due to product mix, partially offset by increased sales volume, and a $39 million decrease in sales and commission expense for VOI Fee-for-Service sales due to lower volume.

Travel and Membership

Net revenues decreased $16 million and Adjusted EBITDA increased $4 million during 2024 compared with 2023. The net revenue decrease was unfavorably impacted by foreign currency of $2 million (0.3%) and the Adjusted EBITDA growth was not materially impacted by foreign currency.

The decrease in net revenues, excluding the impact of foreign currency, was primarily driven by a $11 million decrease in transaction revenue due to lower transactions, partially offset by higher revenue per transaction resulting from price increases; and a $4 million decrease in subscription revenues. Transactions were impacted by an increasing mix of exchange members with a club affiliation who have a lower transaction propensity.

In addition to the revenue change explained above, Adjusted EBITDA excluding the impact of foreign currency was further impacted by:

•$11 million of employee related cost savings related to the strategic restructuring of this segment; which focused on enhancing organizational efficiency and rationalizing operations including $5 million of other operating expenses, $4 million of marketing, and $2 million of general and administrative; and

•$9 million of additional marketing cost savings.

These savings were partially offset by a $6 million increase in cost of sales due to a heavier weighting of rentals in addition to the revenue growth in Travel Clubs.

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Corporate and other

Corporate and other revenue was flat during 2024 compared with 2023 primarily due to a $3 million decrease in revenue from the insurance program we manage on behalf of homeowners associations; wholly offset by a $3 million decrease in eliminated transactions between segments.

Adjusted EBITDA decreased $18 million (26.5%) during 2024 compared with 2023 and was not materially impacted by foreign currency. The decrease in Adjusted EBITDA was primarily due to $15 million of higher general and administrative costs driven by $12 million of higher variable compensation and other employee related costs.

For a comparative review of our consolidated results of operations and those of our reportable segments for the fiscal years ended December 31, 2023 and 2022, refer to Part II, Item 7 of our Annual Report on Form 10-K filed with the SEC on February 21, 2024.

DISCONTINUED OPERATIONS

During 2024, 2023, and 2022, we recognized $33 million, $5 million, and $1 million within Gain on disposal of discontinued business, net of income taxes on the Consolidated Statements of Income.

During 2024, we had $1 million of Net cash provided by investing activities from discontinued operations and in 2022 we had $5 million of Net cash used in investing activities from discontinued operations on the Consolidated Statements of Cash Flows.

See Note 6—Discontinued Operations to the Consolidated Financial Statements for additional details of our discontinued operations.

RESTRUCTURING PLANS

2024 Restructuring Plan

During 2024, we incurred $15 million of restructuring charges associated with the 2024 restructuring plan. These charges included personnel-related costs resulting from a reduction of approximately 300 employees and other expenses. These charges consisted of (i) $10 million of personnel-related costs at the Travel and Membership segment, (ii) $3 million of personnel-related costs at our corporate operations, and (iii) $2 million of personnel-related costs at the Vacation Ownership segment. All material initiative and related expenses have been incurred as of December 31, 2024. We reduced our 2024 restructuring liability by $7 million of cash payments during 2024. The remaining 2024 restructuring liability of $8 million is expected to be paid by the end of 2026.

2023 Restructuring Plan

We incurred $26 million of restructuring charges during the year ended December 31, 2023. These actions were primarily focused on enhancing organizational efficiency and rationalizing operations. These charges included personnel-related costs resulting from a reduction of approximately 250 employees and other expenses. As part of this restructuring plan, we also decided to decrease our facilities by closing our owned office in Indianapolis, Indiana, and exiting other leased locations. The charges consisted of (i) $11 million of personnel-related costs at the Travel and Membership segment, (ii) $9 million of personnel-related costs and $1 million of lease costs at the Vacation Ownership segment, and (iii) $5 million of personnel-related costs at our corporate operations. These restructuring charges included $2 million of accelerated stock-based compensation expense. We reduced our 2023 restructuring liability by $14 million and $8 million of cash payments during the years ended December 31, 2024 and 2023. The remaining 2023 restructuring liability of less than $1 million is expected to be paid by the end of 2025.

2022 Restructuring Plan

We incurred $14 million of restructuring charges during the year ended December 31, 2022. These charges were associated with certain positions that were made redundant based upon changes to our organizational structure, primarily within the Travel and Membership segment. The charges consisted of (i) $9 million of personnel costs at the Travel and Membership segment, (ii) $3 million of lease and personnel-related costs at the Vacation Ownership segment, and (iii) $2 million of personnel-related costs at our corporate operations. These restructuring charges included $3 million of accelerated stock-based compensation expense. During 2024, we recognized an additional $1 million of stock-based compensation expense associated with the 2022 restructuring plan. The 2022 restructuring liability was reduced by $1 million, $7 million, and $5 million of cash payments during the years ended December 31, 2024, 2023, and 2022. As of December 31, 2024, the 2022 restructuring liability has been fully settled.

See Note 26—Restructuring to the Consolidated Financial Statements for additional details of our restructuring activities.

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FINANCIAL CONDITION

Total assets decreased $3 million from December 31, 2023 to December 31, 2024, due to:

•$115 million decrease in Cash and cash equivalents primarily driven by repayment of the $300 million 5.65% notes which were due in April of 2024, $234 million of share repurchases, $142 million of dividend payments, $81 million of property and equipment additions, and $44 million of net payments related to the acquisition of Accor Vacation Club, partially offset by $464 million of net cash provided by operating activities, $196 million of net borrowings on the revolving credit facility, and $62 million of net proceeds on non-recourse debt;

•$64 million decrease in Property and equipment, net driven by $56 million of net transfers of completed VOI inventory from Property and equipment to Inventory;

•$24 million decrease in Trade receivables, net due to net collections of $15 million of developer receivables and $11 million of property management fees; and a

•$15 million decrease in Prepaid expenses driven by a $9 million decrease in prepaid maintenance fees.

These decreases were partially offset by:

•$92 million increase in Inventory driven by $126 million of inventory acquisitions, including the $9 million from the Accor Vacation Club purchase; and $56 million of net transfers of completed VOI inventory from property and equipment; partially offset by $92 million for the sale of VOI inventory;

•$92 million increase in Vacation ownership contract receivables, net, driven by $1.53 billion of VOI originations, partially offset by $983 million of principal collections and net provision for loan losses of $432 million; and a

•$31 million increase in Other assets driven by an increase of $35 million related to timing of payroll payments.

Total liabilities decreased $40 million from December 31, 2023 to December 31, 2024, primarily due to:

•$107 million decrease in Debt driven by repayment of the $300 million 5.65% notes which were due in April of 2024, partially offset by $196 million of net borrowings on the revolving credit facility; and a

•$29 million decrease in Accrued expenses and other liabilities primarily due to the release of a $36 million accrual related to the expiration of certain guarantees associated with the European vacation rentals business, a $17 million decrease in deferred contingent consideration due to a $10 million payment related to the Travel + Leisure brand acquisition and a $7 million fair value adjustment to contingent consideration related to the Playbook365 acquisition, and a $10 million decrease in accrued restructuring, partially offset by a $34 million increase in accrued payroll and related costs, primarily employee bonus and commissions.

These decreases were partially offset by a:

•$52 million increase in Non-recourse vacation ownership debt primarily due to $62 million net borrowings, partially offset by $9 million of foreign exchange impacts;

•$35 million increase in Deferred income taxes primarily due to installment sales; and a

•$15 million increase in Deferred income due to increases of $15 million in deferred co-branded credit card programs, $6 million of VOI trial package revenue, and $5 million of VOI incentive revenue, partially offset by a $10 million decrease in deferred subscription revenue.

Total deficit decreased $37 million from December 31, 2023 to December 31, 2024, primarily due to $411 million of Net income attributable to Travel + Leisure Co. shareholders and a $49 million increase in additional paid-in capital, primarily due to stock-based compensation; partially offset by $235 million of share repurchases and $144 million of dividends, and $42 million of unfavorable currency translation adjustments driven by fluctuations in exchange rates, primarily the Australian Dollar, Euro, and the British Pound Sterling.

LIQUIDITY AND CAPITAL RESOURCES

We believe that we have sufficient sources of liquidity to meet our expected ongoing short-term and long-term cash needs, including capital expenditures, operational and/or strategic opportunities, and expenditures for human capital, intellectual property, contractual obligations, off-balance sheet arrangements, and other such requirements. Our net cash from operations

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and cash and cash equivalents are key sources of liquidity along with our revolving credit facility, bank conduit facilities, and continued access to debt markets. We believe these anticipated sources of liquidity are sufficient to meet our expected ongoing short-term and long-term cash needs, including the repayment of our $350 million notes due in October 2025. Our discussion below highlights these sources of liquidity and how they have been utilized to support our cash needs.

Cash and Cash Equivalents

As of December 31, 2024, we had $167 million of Cash and cash equivalents, which includes highly-liquid investments with an original maturity of three months or less.

$1.0 Billion Revolving Credit Facility

We generally utilize our revolving credit facility to finance our short-term to medium-term business operations, as needed. The facility expires in October 2026 and had $803 million of available capacity as of December 31, 2024.

The revolving credit facility and term loan B facilities are subject to covenants including the maintenance of specific financial ratios as defined in the credit agreement. The financial ratio covenants consist of a minimum interest coverage ratio of no less than 2.50 to 1.0 as of the measurement date and a maximum first lien leverage ratio not to exceed 4.25 to 1.0 as of the measurement date. The interest coverage ratio is calculated by dividing consolidated EBITDA (as defined in the credit agreement) by consolidated interest expense (as defined in the credit agreement), both as measured on a trailing 12-month basis preceding the measurement date. The first lien leverage ratio is calculated by dividing consolidated first lien debt (as defined in the credit agreement) as of the measurement date by consolidated EBITDA (as defined in the credit agreement) as measured on a trailing 12-month basis preceding the measurement date. Our first lien leverage ratio determines the interest rate spread on revolver borrowings and fees associated with letters of credit, which subjects them to fluctuation.

As of December 31, 2024, our interest coverage ratio was 4.40 to 1.0 and our first lien leverage ratio was 3.32 to 1.0. These ratios do not include interest expense or indebtedness related to any qualified securitization financing (as defined in the credit agreement). As of December 31, 2024, we were in compliance with the financial covenants described above.

Secured Notes and Term Loan B facilities

We generally utilize borrowing via secured note issuances to meet our long-term financing needs. During 2024, we amended the credit agreement governing our revolving credit facility and term loan B facilities (“Sixth Amendment”). The Sixth Amendment repriced and replaced the $593 million outstanding balance on the 2023 Incremental Term Loan B facility and refinanced the $282 million outstanding balance on the 2018 Term Loan B facility which was due May 2025. This amendment accomplished the dual benefit of extending the maturity of our 2018 Term Loan B facility and providing future interest savings. The resulting new $875 million 2024 Term Loan B facility matures on December 14, 2029. This transaction reinforces our expectation that we will maintain adequate liquidity for the next year and beyond. As of December 31, 2024, we had $3.25 billion of outstanding borrowings under our secured notes and term loan B facility with maturities ranging from 2025 to 2030.

Non-recourse Vacation Ownership Debt

Our Vacation Ownership business finances certain of its VOCRs through (i) asset-backed conduit facilities and (ii) term asset-backed securitizations, all of which are non-recourse to us with respect to principal and interest. For the securitizations, we pool qualifying VOCRs and sell them to bankruptcy-remote entities, all of which are consolidated into the accompanying Consolidated Balance Sheets. We plan to continue using these sources to finance certain VOCRs. On December 20, 2024, we renewed our AUD/NZD bank conduit facility, extending its term through December 2026. We believe that our USD bank conduit facility and our AUD/NZD bank conduit facility, amounting to a combined capacity of $738 million ($361 million available as of December 31, 2024), along with our ability to issue term asset-backed securities, provide sufficient liquidity to finance the sale of VOIs beyond the next year.

We closed on securitization financings of $1.05 billion, $1.09 billion, and $800 million during 2024, 2023, and 2022. These transactions positively impacted our liquidity and reinforce our expectation that we will maintain adequate liquidity for the next year and beyond.

Our liquidity position may be negatively affected by unfavorable conditions in the capital markets in which we operate or if our VOCR portfolios do not meet specified portfolio credit parameters. Our liquidity, as it relates to our VOCR securitization program, could be adversely affected if we were to fail to renew or replace our conduit facilities on their expiration dates, or if a particular receivables pool were to fail to meet certain ratios, which could occur in certain instances if the default rates or other credit metrics of the underlying VOCRs deteriorate. Our ability to sell securities backed by our VOCRs depends on the continued ability and willingness of capital market participants to invest in such securities.

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Each of our non-recourse securitized term notes and the bank conduit facilities contain various triggers relating to the performance of the applicable loan pools. If the VOCR pool that collateralizes one of our securitization notes fails to perform within the parameters established by the contractual triggers (such as higher default or delinquency rates), there are provisions pursuant to which the cash flows for that pool will be maintained in the securitization as extra collateral for the note holders or applied to accelerate the repayment of outstanding principal to the note holders. As of December 31, 2024, all of our securitized loan pools were in compliance with applicable contractual triggers.

We may, from time to time, depending on market conditions and other factors, repurchase our outstanding indebtedness, whether or not such indebtedness trades above or below its face amount, for cash and/or in exchange for other securities or other consideration, in each case in open market purchases and/or privately negotiated transactions.

For additional details regarding our credit facilities, term loan B facilities, and non-recourse debt see Note 15—Debt to the Consolidated Financial Statements.

Material Cash Requirements

The following table summarizes material future contractual obligations of our continuing operations (in millions). We plan to fund these obligations along with our other cash requirements, with net cash from operations, cash and cash equivalents, and through the use of our revolving credit facilities, bank conduit facilities, and continued access to debt markets.

(a)Represents required principal payments on notes, term loans, and finance leases.

(b)Represents required principal payments on debt that is securitized through bankruptcy-remote special purpose entities, the creditors of which have no recourse to us for principal and interest.

(c)Includes interest on debt and non-recourse debt; estimated using the stated interest rates.

(d)Includes $502 million for marketing related activities, $116 million relating to the development of vacation ownership properties, and $106 million for information technology activities.

(e)Excludes a $30 million liability for unrecognized tax benefits as it is not reasonably estimable to determine the periods in which such liability would be settled with the respective tax authorities.

In addition to the amounts shown in the table above and in connection with our separation from ABG, we entered into certain guarantee commitments with ABG (pursuant to our assumption of certain liabilities and our obligation to indemnify ABG, Anywhere Real Estate Inc., and Travelport for such liabilities) and guarantee commitments related to deferred compensation arrangements with ABG and Anywhere Real Estate Inc. We also entered into certain guarantee commitments and indemnifications related to the sale of our vacation rentals businesses. For information on matters related to our former parent and subsidiaries see Note 27—Transactions with Former Parent and Former Subsidiaries to the Consolidated Financial Statements.

In addition to the key contractual obligation and separation related commitments described above, we have the following other commercial commitments and off-balance sheet arrangements.

We enter into agreements that contain standard guarantees and indemnities whereby we indemnify another party for specified breaches of, or third-party claims relating to, an underlying agreement. Such underlying agreements are typically entered into by one of our subsidiaries. The various underlying agreements generally govern purchases, sales or outsourcing of products or services, leases of real estate, licensing of software and/or development of vacation ownership properties, customer data safeguards, access to credit facilities, derivatives, and issuances of debt securities. We also provide corporate guarantees for our operating business units relating to merchant credit-card processing for prepaid customer stays and other deposits. While a majority of these guarantees and indemnifications extend only for the duration of the underlying agreement, some survive the expiration of the agreement. We are not able to estimate the maximum potential amount of future payments to be made under these guarantees and indemnifications as the triggering events are not predictable. In certain cases we receive offsetting indemnifications from third-parties and/or maintain insurance coverage that may mitigate any potential payments.

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Our Vacation Ownership business provides guarantees to certain owners’ associations for funds required to operate and maintain vacation ownership properties in excess of assessments collected from owners of the VOIs. We may be required to fund such a shortfall as a result of unsold company-owned VOIs or failure by owners to pay such assessments. In addition, from time to time, we may agree to reimburse certain owner associations up to 75% of their uncollected assessments. These guarantees extend for the duration of the underlying subsidy or similar agreement (which generally approximate one year and are renewable at our discretion on an annual basis). The maximum potential future payments that we could be required to make under these guarantees was $452 million as of December 31, 2024. We would only be required to pay this maximum amount if none of the assessed owners paid their assessments. Any assessments collected from the owners of the VOIs would reduce the maximum potential amount of future payments we would be required to make. Additionally, should we be required to fund the deficit through the payment of any owners’ assessments under these guarantees, we would be permitted to use that property to engage in revenue-producing activities such as rentals. During 2024, 2023, and 2022, we made payments related to these guarantees of $13 million, $12 million, and $12 million. As of December 31, 2024 and 2023, we maintained a liability in connection with these guarantees of $17 million and $21 million included within Accrued expenses and other liabilities on the Consolidated Balance Sheets.

As part of the Fee-for-Service program, we may guarantee to reimburse the developer or to purchase inventory from the developer, for a percentage of the original sale price if certain future conditions exist. As of December 31, 2024, the maximum potential future payments that we may be required to make under these guarantees is $55 million. As of December 31, 2024 and 2023, we had no recognized liabilities in connection with these guarantees.

We generally utilize letters of credit to support the securitization of VOCR fundings, certain insurance policies, and development activities in our Vacation Ownership business. As of December 31, 2024, we had $45 million of irrevocable standby letters of credit outstanding, $1 million of which were under our revolving credit facility. As of December 31, 2023, we had $47 million of irrevocable standby letters of credit outstanding, $2 million of which were under our revolving credit facility.

We also utilize surety bonds in our Vacation Ownership business for sales and development transactions in order to meet regulatory requirements of certain states. In the ordinary course of our business, we have assembled commitments from 13 surety providers in the amount of $2.38 billion, of which we had $550 million outstanding as of December 31, 2024. The availability, terms and conditions, and pricing of bonding capacity are dependent on, among other things, continued financial strength and stability of the insurance company affiliates providing the bonding capacity, general availability of such capacity, and our corporate credit rating. If the bonding capacity is unavailable or, alternatively, the terms and conditions and pricing of the bonding capacity are unacceptable to us, our Vacation Ownership business could be negatively impacted.

We have company sponsored severance plans in place for certain employees in the event of involuntary terminations, other than for cause. As of December 31, 2024, our maximum obligation under these severance plans was $204 million. Refer to the Proxy Statement for our 2025 Annual Meeting of Shareholders under the captions “Compensation of Directors,” “Executive Compensation” and “Committees of the Board” for additional details regarding executive compensation.

Our secured debt is rated Ba3 with a “stable outlook” by Moody’s Investors Service, Inc., BB- with a “stable outlook” by Standard & Poor’s Rating Services, and BB+ with a “stable outlook” by Fitch Rating Agency. A security rating is not a recommendation to buy, sell or hold securities and is subject to revision or withdrawal by the assigning rating organization. Reference in this report to any such credit rating is intended for the limited purpose of discussing or referring to aspects of our liquidity and of our costs of funds. Any reference to a credit rating is not intended to be any guarantee or assurance of, nor should there be any undue reliance upon, any credit rating or change in credit rating, nor is any such reference intended as any inference concerning future performance, future liquidity or any future credit rating.

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CASH FLOWS

The following table summarizes the changes in cash, cash equivalents, and restricted cash between 2024 and 2023 (in millions). For a comparative review of the fiscal years ended December 31, 2023 and 2022, refer to the Cash Flows section in Part II, Item 7 of our Annual Report on Form 10-K filed with the SEC on February 21, 2024.

Operating Activities

Net cash provided by operating activities increased $114 million for the year ended December 31, 2024 compared to the prior year. This increase was primarily attributable to an increase in Net income attributable to Travel + Leisure Co. shareholders of $15 million, $82 million of non-cash add-back items, and $44 million of lower cash tax payments.

Investing Activities

Net cash used in investing activities from continuing operations increased $45 million during the year ended December 31, 2024. This increase was primarily due to $44 million paid for the acquisition of Accor Vacation Club.

Net cash provided by investing activities from discontinued operations increased $1 million due to a tax refund received for pre-sale tax items related to the sale of the European vacation rentals business.

Financing Activities

Net cash used in financing activities decreased $42 million during the year ended December 31, 2024. This decrease was primarily due to a $75 million decrease in share repurchases partially offset by a $41 million decrease in net proceeds on non-recourse debt.

Capital Deployment

We focus on deploying capital for the highest possible returns. Ultimately, our business objective is to grow our business while optimizing cash flow and Adjusted EBITDA. We intend to continue to invest in select capital and technological improvements across our business. We also regularly consider a wide array of potential acquisitions and other strategic transactions, including acquisitions of businesses and real property, joint ventures, business combinations, strategic investments, and dispositions. Any of these transactions could be material to our business. As part of this strategy, we have made, and expect to continue to make, proposals and enter into non-binding letters of intent, allowing us to conduct due diligence on a confidential basis. A potential transaction contemplated by a letter of intent may never reach the point where we enter into a definitive agreement, nor can we predict the timing of such a potential transaction. Finally, we intend to continue to return value to shareholders through the repurchase of common stock and payment of dividends. All future declarations of quarterly cash dividends and increases to the capacity of our share repurchase program are subject to final approval by the Board of Directors (“Board”).

During 2024, we spent $106 million on vacation ownership development projects (inventory). We believe that our Vacation Ownership business currently has adequate finished inventory to support vacation ownership sales for several years. As such, we expect to remain below historical levels of spending for vacation ownership development projects in 2025 with anticipated spending between $150 million and $180 million. After factoring in the anticipated additional annual spending, we expect to have adequate inventory to support vacation ownership sales through at least the next four to five years.

During 2024, we spent $81 million on capital expenditures, primarily for information technology and sales center improvement projects. During 2025, we anticipate spending between $120 million and $130 million on capital expenditures, primarily for continuation of information technology digital and new club initiatives, sales center facility and related system enhancements, resort improvements, and a new corporate office.

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In connection with our focus on optimizing cash flow, we are continuing our asset-light efforts in vacation ownership by seeking opportunities with financial partners whereby they make strategic investments to develop assets on our behalf. We refer to this as Just-in-Time. The partner may invest in new ground-up development projects or purchase from us, for cash, existing in-process inventory which currently resides on our Consolidated Balance Sheets. The partner will complete the development of the project and we may purchase finished inventory at a future date as needed or as obligated under the agreement.

We expect that the majority of the expenditures that will be required to pursue our capital spending programs, strategic investments, and vacation ownership development projects will be financed with cash flow generated through operations and cash and cash equivalents. We expect that additional expenditures will be financed with general secured corporate borrowings, including through the use of available capacity under our revolving credit facility.

Share Repurchase Program

On August 20, 2007, our Board authorized a share repurchase program that enables us to purchase our common stock. As of December 31, 2024, the Board has increased the capacity of the program 10 times, most recently in May 2024 by $500 million, bringing the total authorization under the current program to $7.0 billion. Proceeds received from stock option exercises have increased the repurchase capacity by $87 million since the inception of this program. We had $441 million of remaining availability in our program as of December 31, 2024.

Under our current share repurchase program, we repurchased 5.2 million shares at an average price of $45.73 for a cost of $235 million during the year ended December 31, 2024. The amount and timing of specific repurchases are subject to market conditions, applicable legal requirements and other factors, including capital allocation priorities. Repurchases may be conducted in the open market or in privately negotiated transactions.

Dividends

We paid cash dividends of $0.50 per share for all four quarters of 2024, $0.45 per share for all four quarters of 2023, and $0.40 per share for all four quarters of 2022. The aggregate dividends paid to shareholders for 2024, 2023, and 2022 were $142 million, $136 million, and $135 million.

Our long-term plan is to grow our dividend at the rate of growth of our earnings at a minimum. The declaration and payment of future dividends to holders of our common stock are at the discretion of our Board and depend upon many factors, including our financial condition, earnings, capital requirements of our business, covenants associated with certain debt obligations, legal requirements, regulatory constraints, industry practice and other factors that our Board deems relevant. There is no assurance that a payment of a dividend or a dividend at current levels will occur in the future.

Foreign Earnings

We assert that substantially all undistributed foreign earnings will be reinvested indefinitely as of December 31, 2024. In the event we determine not to continue to assert that all or part of our undistributed foreign earnings are permanently reinvested, such a determination in the future could result in the accrual and payment of additional foreign withholding taxes, as well as U.S. taxes on currency transaction gains and losses, the determination of which is not practicable.

SEASONALITY

We experience seasonal fluctuations in our net revenues and net income from sales of VOIs and vacation exchange fees. Revenue from sales of VOIs is generally higher in the third quarter than in other quarters due to increased leisure travel. Revenue from vacation exchange fees is generally highest in the first quarter, which is typically when members of our vacation exchange business book their vacations for the year.

The seasonality of our business may cause fluctuations in our quarterly operating results. As we expand into new markets and geographical locations, we may experience increased or different seasonality dynamics that create fluctuations in operating results different from the fluctuations we have experienced in the past.

COMMITMENTS AND CONTINGENCIES

From time to time, we are involved in claims, legal and regulatory proceedings, and governmental inquiries related to our business, none of which, in the opinion of management, is expected to have a material effect on our results of operations or financial condition. See Note 19—Commitments and Contingencies to the Consolidated Financial Statements for a description of claims and legal actions arising in the ordinary course of our business along with our guarantees and indemnifications and Note 27—Transactions with Former Parent and Former Subsidiaries to the Consolidated Financial Statements for a description of our obligations regarding ABG contingent litigation, matters related to Wyndham Hotels, and matters related to the vacation rentals businesses.

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CRITICAL ACCOUNTING ESTIMATES

In presenting our financial statements in conformity with GAAP, we are required to make estimates and assumptions that affect the amounts reported therein. Several of these estimates and assumptions relate to matters that are inherently uncertain as they pertain to future events. However, events that are outside of our control cannot be predicted and, as such, they cannot be contemplated in evaluating such estimates and assumptions. If there is a significant unfavorable change to current conditions, it could result in a material impact to our consolidated results of operations, financial position, and liquidity. We believe that the estimates and assumptions we used when preparing our financial statements were the most appropriate at that time. In addition to our significant accounting policies referenced in Note 2—Summary of Significant Accounting Policies to the Consolidated Financial Statements, presented below are the critical accounting estimates that we believe require subjective and complex judgments that could potentially affect reported results.

Vacation Ownership Revenue Recognition and Allowance for Loan Losses. Our sales of VOIs are either cash sales or developer-financed sales. For developer-financed sales, we project our losses for uncollectible accounts over the entire lives of our notes. This estimate of uncollectible consideration reduces the amount of revenue recognized at the time of sale and establishes an allowance for loan loss which reduces the receivable.

Our estimates of uncollectible amounts are based on the results of our static pool analysis which tracks defaults for each year’s sales over the entire life of those contract receivables. We consider current defaults, past due aging, historical write-offs of contracts and consumer credit scores (FICO scores) in the assessment of a borrower’s credit strength, down payment amount and expected loan performance. We also consider whether the historical economic conditions are comparable to current economic conditions. If current or expected future conditions differ from the conditions in effect when the historical experience was generated, we adjust the allowance for loan losses to reflect the expected effects of the current environment on the collectability of our VOCRs. There were no changes to the assumptions used in this model in 2024.

Changes in our estimates of uncollectible amounts could result in a material impact to our allowance for loan losses. A one percent change in projected losses would increase our allowance for loan losses by approximately $6 million. See Note 9—Vacation Ownership Contract Receivables to the Consolidated Financial Statements for additional details of our allowance for loan losses.

Inventory. We use the relative sales value method of costing and relieving our VOI inventory. This method requires us to make estimates subject to significant uncertainty, including future sales prices and volumes as well as credit losses and related inventory recoveries. The impact of any changes in estimates under the relative sales value method is recorded in Cost of vacation ownership interests on the Consolidated Statements of Income in order to retrospectively adjust the margin previously recorded subject to those estimates. There were no changes in these assumptions during 2024.

Impairment of Long-Lived Assets. We perform an annual review of our goodwill and other indefinite-lived intangible assets, or more frequently if indicators of potential impairment exist. This analysis requires significant judgments, including anticipated market conditions, operating expense trends, estimation of future cash flows, which are dependent on internal forecasts, and estimation of long-term rate of growth. The estimates used to calculate the fair value of other indefinite-lived intangible assets change from year to year based on operating results and market conditions. Changes in these estimates and assumptions could materially affect the determination of fair value and the other indefinite-lived intangible assets impairment. There were no changes in the assumptions used in this analysis in 2024.

Business Combinations. A component of our growth strategy has been to acquire and integrate businesses that complement our existing operations. We account for business combinations in accordance with the guidance for business combinations and related literature. Accordingly, we allocate the purchase price of acquired companies to the tangible and intangible assets acquired and liabilities assumed based upon their estimated fair values at the date of purchase, with the exception of contract assets and contract liabilities with a customer acquired in a business combination, for business combinations that occurred in 2022 or later. For these transactions we recognize and measure those contracts as though we had entered into the agreement with the customer as of the same date as the acquiree. This generally will result recognizing contract assets and contract liabilities at amounts consistent with those recorded by the acquiree immediately before the acquisition date. The difference between the purchase price and the fair value of the net assets acquired is recorded as goodwill.

In determining the fair values of assets acquired and liabilities assumed in a business combination, we use various recognized valuation methods including present value modeling and referenced market values (where available). Further, we make assumptions within certain valuation techniques including discount rates and timing of future cash flows. Valuations are performed by management or independent valuation specialists under management’s supervision, where appropriate. We believe that the estimated fair values assigned to the assets acquired and liabilities assumed are based on reasonable

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assumptions that marketplace participants would use. However, such assumptions are inherently uncertain and actual results could differ from those estimates.

Guarantees. In the ordinary course of business, we enter into agreements that contain standard guarantees and indemnities whereby we indemnify another party for specified breaches of, or third-party claims relating to, an underlying agreement. Such underlying agreements are typically entered into by one of our subsidiaries. The various underlying agreements generally govern purchases, sales or outsourcing of products or services, leases of real estate, licensing of software and/or development of vacation ownership properties, access to credit facilities, derivatives and issuances of debt securities. Also in the ordinary course of business, we provide corporate guarantees for our operating business units relating to merchant credit-card processing for prepaid customer stays and other deposits. While a majority of these guarantees and indemnifications extend only for the duration of the underlying agreement, some survive the expiration of the agreement. We are not able to estimate the maximum potential amount of future payments to be made under these guarantees and indemnifications as the triggering events are not predictable. In certain cases, we maintain insurance coverage that may mitigate any potential payments.

Income Taxes. We regularly review our deferred tax assets to assess their potential realization and establish a valuation allowance for portions of such assets that we believe will not be ultimately realized. In performing this review, we make estimates and assumptions regarding projected future taxable income, the expected timing of the reversals of existing temporary differences and the implementation of tax planning strategies. 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 impact our results of operations.

For tax positions we have taken or expect to take in our tax return, we apply a more likely than not threshold, under which we must conclude a tax position is more likely than not to be sustained, assuming that the position will be examined by the appropriate taxing authority that has full knowledge of all relevant information, in order to recognize or continue to recognize the benefit. In determining our provision for income taxes, we use judgment, reflecting our estimates and assumptions, in applying the more likely than not threshold.

ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

BUSINESS AND OVERVIEW

We are a global provider of hospitality services and travel products and operate our business in the following two segments:

•Vacation Ownership — develops, markets, and sells vacation ownership interests (“VOIs”) to individual consumers, provides consumer financing in connection with the sale of VOIs, and provides property management services at resorts. This segment includes our Wyndham Destinations business line.

•Travel and Membership — operates a variety of travel businesses, including vacation exchange brands, travel technology platforms, travel memberships, and direct-to-consumer rentals. This segment is comprised of our Exchange and Travel Club business lines.

Economic Conditions and Key Business Trends

Our business continues to leverage demand for leisure travel, as consumers have prioritized leisure travel following COVID-19. While we are experiencing the benefits of current demand levels, recent inflationary pressures, higher interest rates, and risk of recession inherently result in uncertainty in business trends and consumer behavior. Since the peak of COVID-19, we have experienced trends of increased gross VOI sales, including sales to new owners, volume per guest (“VPG”), and tours. With the strength in travel demand, we are once again focusing on increasing the mix of new owner sales in order to expand our pipeline of potential future owner upgrade sales. As expected with this strategic shift, we are beginning to see our VPGs moderate, however they remain above pre-pandemic levels. In addition to the new owner impact on our VPGs, during 2023 we saw a modest softening of close rates, which we believe reflects demand stabilization after the release of pent-up travel demand that benefited us in the prior year. Despite this modest softening of close rates during the year, they still remain above pre-pandemic levels.

During the pandemic we made changes to our consumer credit quality marketing criteria. These changes are intended to strengthen sales efficiencies as well as the performance of our vacation ownership contract receivables (“VOCR”) portfolio. As a result of these changes we have seen an overall improvement in delinquencies, although we saw some normalization of delinquency rates during 2023, they remain below 2019 levels.

Our current VOI inventory levels are expected to be sufficient to support sales during the near term, which limits our exposure to increased inventory costs due to the potential effects of inflation. Higher interest rates negatively impacted our interest expense during 2023 as well as the reporting periods since COVID-19 and, if interest rates remain elevated, we would expect this trend to continue. Although we are not currently seeing meaningful signs of a slowdown in leisure travel demand at our Vacation Ownership business, we are monitoring economic conditions.

During 2023, our Travel and Membership segment saw a decrease in transactions due to an increasing mix of exchange members with a club affiliation, who have a lower transaction propensity. This is a trend we expect to continue into 2024. Transactions were also impacted by a slower than expected ramp-up of our travel clubs. The decrease in transactions was partially offset by an improvement in revenue per transaction.

While our Vacation Ownership business is benefited by the fact that the majority of our owners do not have loans and are therefore less dependent on economic conditions when making travel decisions, this business, and, to a greater extent, our Travel and Membership businesses are highly dependent on the health of the travel industry and we are subject to the other risks and uncertainties discussed in “Risk Factors” contained in Part I, Item 1A of our Annual Report on Form 10-K.

Inflation Reduction Act

On August 16, 2022, the United States (“U.S.”) enacted the Inflation Reduction Act. Among other provisions, this new law imposes a 15% minimum tax rate for large corporations with an average of more than $1.0 billion of adjusted financial statement income over a three-year period, and a 1% excise tax on stock buybacks. These changes became effective for the 2023 tax year. We do not currently expect to be subject to the minimum tax, but we will continue to monitor as this could change. We are subject to the 1% excise tax and during 2023 have incurred $3 million of excise tax related to share repurchases, which is expected to be paid in April 2024. This excise tax is included within Treasury stock on the Consolidated Balance Sheets.

Pillar Two

The Organization for Economic Co-operation and Development (“OECD”), continues to put forth various initiatives, including Pillar Two rules which include the introduction of a global minimum tax at a rate of 15%. European Union member states agreed to implement the OECD’s Pillar Two rules with effective dates of January 1, 2024 and January 1, 2025, for different

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aspects of the directive and most have already enacted legislation. A number of other countries are also implementing similar legislation. These changes may increase our taxes in the applicable jurisdictions or cause us to change the way we operate our business and result in increased taxation of our international earnings. We are currently in the process of evaluating the impact these changes will have on our consolidated financial statements, and are closely monitoring other countries that may enact similar legislation.

Playbook365 Acquisition

On January 3, 2023, we acquired the Playbook365 business for $13 million, comprised of $6 million of cash paid at closing and contingent consideration with a fair market value of $7 million, which can range to $24 million, based on the achievement of certain financial metrics. Playbook365 is a youth and amateur sports management platform. This platform was integrated with Alliance Reservations Network’s (“ARN”) event lodging management platform to create an all-in-one solution in the youth sports market. This acquisition was made to broaden the products and services offered by ARN, and is included within the Travel and Membership segment. See Note 5—Acquisitions to the Consolidated Financial Statements for additional details.

Sports Illustrated Resorts Agreement

On September 11, 2023, we entered into an agreement to acquire the rights to the vacation ownership business of Sports Hospitality Ventures, LLC (“SHV”), a hotel and resorts licensee for the Sports Illustrated brand. Together with SHV, we introduced a new concept for a network of sports-themed resort and lifestyle complexes in popular college towns and leisure destinations. The new resorts are anticipated to be developed using an asset-light development financing model. The first resort in the new business line is expected to open in Tuscaloosa, Alabama, in late 2025. This new business line is included within the Vacation Ownership segment. There is no immediate earnings impact for us, but we expect this business to drive incremental growth starting in the second half of 2025.

SEGMENT OVERVIEW

Vacation Ownership

We develop, market, and sell VOIs to individual consumers, provide consumer financing in connection with the sale of VOIs, and provide property management services at resorts. Our sales of VOIs are either cash sales or developer-financed sales. Developer-financed sales are typically collateralized by the underlying VOI. Revenue is recognized on VOI sales upon transfer of control, which is defined as the point in time when a binding sales contract has been executed, the financing contract has been executed for the remaining transaction price, the statutory rescission period has expired, and the transaction price has been deemed to be collectible.

For developer-financed sales, we reduce the VOI sales transaction price by an estimate of uncollectible consideration at the time of the sale. Our estimates of uncollectible amounts are based largely on the results of our static pool analysis which relies on historical payment data by customer class.

In connection with entering into a VOI sale, we may provide our customers with certain non-cash incentives, such as credits for future stays at our resorts. For those VOI sales, we allocate the sales price between the VOI sale and the non-cash incentive. Non-cash incentives generally have expiration periods of two years or less and are recognized at a point in time upon transfer of control.

We provide day-to-day property management services including oversight of housekeeping services, maintenance, and certain accounting and administrative services for property owners’ associations and clubs. These services may also include reservation and resort renovation activities. Such agreements are generally for terms of one year or less and are renewed automatically on an annual basis. Our management agreements contain cancellation clauses, which allow for either party to cancel the agreement, by either a majority board vote or a majority vote of non-developer interests. We receive fees for such property management services which are collected monthly in advance and are based upon total costs to operate such resorts (or as services are provided in the case of resort renovation activities). Fees for property management services typically approximate 10% of budgeted operating expenses. We are entitled to consideration for reimbursement of costs incurred on behalf of the property owners’ association in providing management services (“reimbursable revenue”). These reimbursable costs principally relate to the payroll costs for management of the associations, club and resort properties where we are the employer and are reflected as a component of Operating expenses on the Consolidated Statements of Income. We reduce our management fees revenue for amounts paid to the property owners’ association that reflect maintenance fees for VOIs for which we retain ownership, as we have concluded that such payments are consideration payable to a customer. Property management fee revenues and reimbursable revenues are recognized when the services are performed and are recorded as a component of Service and membership fees on the Consolidated Statements of Income.

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Within our Vacation Ownership segment, we measure operating performance using the following key operating statistics: (i) gross VOI sales including sales under our Fee-for-Service program before the effect of loan loss provisions, (ii) tours, which represents the number of tours taken by guests in our efforts to sell VOIs, and (iii) volume per guest, which measures the efficiency of this business’ tour selling efforts, is calculated by dividing the gross VOI sales (excluding telesales and virtual sales) by the number of tours. We have excluded non-tour sales in the calculation of VPG because they are generated by a different marketing channel.

Travel and Membership

We derive a majority of our revenues from membership dues and fees for facilitating members’ trading of their timeshare intervals. Revenues from membership dues represent the fees paid by members or affiliated clubs on their behalf. As a provider of vacation exchange services, we enter into affiliation agreements with developers of vacation ownership properties to allow owners of VOIs to trade their intervals for intervals at other properties affiliated with our vacation exchange network and, for some members, for other leisure-related services and products. We recognize revenues from membership dues paid by the member on a straight-line basis over the membership period as the performance obligations are fulfilled through delivery of publications, if applicable, and by providing access to travel-related products and services. Estimated net contract consideration payable by affiliated clubs for memberships is recognized as revenue over the term of the contract with the affiliated club in proportion to the estimated average monthly member count. Such estimates are adjusted periodically for changes in the actual and forecasted member activity. For additional fees, members have the right to exchange their intervals for intervals at other properties affiliated with our vacation exchange networks and, for certain members, for other leisure-related services and products. We also derive revenue from facilitating bookings of travel accommodations that were acquired from various sources. Revenue is recognized when these transactions have been confirmed, net of expected cancellations.

Our vacation exchange business also derives revenues from programs with affiliated resorts, club servicing, and loyalty programs; and additional exchange-related products that provide members with the ability to protect trading power or points, extend the life of deposits, and combine two or more deposits for the opportunity to exchange into intervals with higher trading power. Revenues from other vacation exchange related product fees are deferred and recognized upon the occurrence of a future exchange, event, or other related transaction.

We earn revenue from our RCI Elite Rewards co–branded credit card program, which is primarily generated by cardholder spending and the enrollment of new cardholders. The advance payments received under the program are recognized as a contract liability until our performance obligations have been satisfied. The primary performance obligation for the program relates to brand performance services. Total contract consideration is estimated and recognized on a straight-line basis over the contract term.

Within our Travel and Membership segment, we measure operating performance using the following key operating statistics: (i) average number of exchange members, which represents paid members in our vacation exchange programs who are considered to be in good standing; (ii) transactions, which represents the number of exchanges and travel bookings recognized as revenue during the period, net of cancellations; and (iii) revenue per transaction, which represents transaction revenue divided by transactions. Transactions and revenue per transaction are provided in two categories: Exchange, which is primarily RCI, and Travel Club.

Other Items

We record property management service revenues for our Vacation Ownership segment and RCI Elite Rewards revenues for our Travel and Membership segment gross as a principal.

RESULTS OF OPERATIONS

We have two reportable segments: Vacation Ownership and Travel and Membership. The reportable segments presented below are those for which discrete financial information is available and which are utilized on a regular basis by the chief operating decision maker to assess performance and to allocate resources. In identifying our reportable segments, we also consider the nature of services provided by the operating segments. Management uses Adjusted EBITDA to assess the performance of the reportable segments. We define Adjusted EBITDA as net income from continuing operations before depreciation and amortization, interest expense (excluding consumer financing interest), early extinguishment of debt, interest income (excluding consumer financing revenues) and income taxes. Adjusted EBITDA also excludes stock-based compensation costs, separation and restructuring costs, legacy items, transaction costs for acquisitions and divestitures, asset impairments/recoveries, gains and losses on sale/disposition of business, and items that meet the conditions of unusual and/or infrequent. Legacy items include the resolution of and adjustments to certain contingent assets and liabilities related to acquisitions of continuing businesses and dispositions, including the separation of Wyndham Hotels & Resorts, Inc. (“Wyndham Hotels”) and Cendant Corporation (“Cendant”), and the sale of the vacation rentals businesses. We believe that Adjusted EBITDA is a useful measure of

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performance for our segments which, when considered with generally accepted accounting principles in the U.S. (“GAAP”) measures, we believe gives a more complete understanding of our operating performance. Our presentation of Adjusted EBITDA may not be comparable to similarly-titled measures used by other companies.

OPERATING STATISTICS

The table below presents our operating statistics for the years ended December 31, 2023 and 2022. These operating statistics are the drivers of our revenues and therefore provide an enhanced understanding of our businesses. Refer to “The Year Ended December 31, 2023 vs. The Year Ended December 31, 2022” section for a discussion of how these operating statistics affected our business for the periods presented.

(a)Represents total sales of VOIs, including sales under the Fee-for-Service program before the effect of loan loss provisions. We believe that Gross VOI sales provides an enhanced understanding of the performance of our Vacation Ownership business because it directly measures the sales volume of this business during a given reporting period.

(b)Represents the number of tours taken by guests in our efforts to sell VOIs.

(c)VPG is calculated by dividing Gross VOI sales (excluding telesales and virtual sales) by the number of tours. We have excluded non-tour sales in the calculation of VPG because they are generated by a different marketing channel. We believe that VPG provides an enhanced understanding of the performance of our Vacation Ownership business because it directly measures the efficiency of this business’ tour selling efforts during a given reporting period.

(d)Includes the impact of acquisitions from the acquisition dates forward.

(e)Represents the number of exchanges and travel bookings recognized as revenue during the period, net of cancellations.

(f)Represents transaction revenue divided by transactions.

(g)Represents paid members in our vacation exchange programs who are considered to be in good standing.

(h)Percentage change may not calculate due to rounding.

(i)The following table provides a reconciliation of Vacation ownership interest sales, net to Gross VOI sales (in millions):

(1)     Represents total sales of VOIs through our Fee-for-Service programs where inventory is sold through our sales and marketing channels for a commission. Fee-for-Service commission revenues were $131 million and $116 million for the years ended December 31, 2023 and 2022. These commissions are reported within Service and membership fees on the Consolidated Statements of Income.

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THE YEAR ENDED DECEMBER 31, 2023 VS. THE YEAR ENDED DECEMBER 31, 2022

Our consolidated results are as follows (in millions):

Net revenues increased $183 million during 2023 compared with 2022. This increase was unfavorably impacted by foreign currency of $7 million (0.2%). Excluding the impacts of foreign currency, the increase in net revenues was primarily due to:

•$212 million of increased revenues at our Vacation Ownership segment primarily due to an increase in gross VOI sales, net of Fee-for-Service sales as a result of increased tours, partially offset by an increase in our provision for loan losses associated with these sales; higher property management revenues resulting from higher property management fees and reimbursable revenues; increased other revenues due to higher VOI travel package and incentive revenues; an increase in consumer financing revenues primarily due to a higher average portfolio balance; and increased commission revenues due to higher volume of VOI Fee-for-Service sales; partially offset by

•$23 million of decreased revenues at our Travel and Membership segment primarily due to lower transactions, partially offset by increased revenue per transaction.

Expenses increased $114 million during 2023 compared with 2022. This increase in expenses, excluding immaterial foreign currency impacts, was primarily the result of:

•$56 million increase in marketing costs mainly in support of increased tour flow and new owner mix at our Vacation Ownership business;

•$45 million increase in property management expenses due to higher reimbursable resort operating costs and expenses;

•$32 million increase in consumer financing interest expense primarily due to an increased weighted average coupon rate;

•$31 million increase in sales and commission expenses at the Vacation Ownership segment due to higher gross VOI sales, net of Fee-for-Service sales; and a

•$12 million increase in restructuring costs as we focused on enhancing organizational efficiency and rationalizing operations.

These increases were partially offset by a $25 million decrease in general and administrative expenses driven by lower professional fees and employee costs; $24 million decrease in the cost of VOIs sold primarily due to estimated recoveries associated with the aforementioned provision increase and product mix; and a $10 million decrease due to asset impairments recorded in the prior year.

We recognized a loss on sale of business of $2 million during 2023 resulting from the sale of the Love Home Swap business.

Interest expense increased $56 million during 2023 compared with 2022 primarily due to increased borrowing activity under the revolving credit facility, the issuance of the 2022 Incremental Term Loan B facility in the fourth quarter of 2022, and higher interest rates on variable borrowings in 2023.

Other income, net of other expense decreased $19 million during 2023 compared with 2022, primarily due to a $10 million benefit in the prior year, related to a reduction in the fair value of contingent consideration associated with a business acquisition.

Interest income increased $7 million during 2023 compared with 2022 primarily due to higher interest rates.

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Our effective tax rates were 19.4% and 26.7% for the years ended December 31, 2023 and 2022. Our effective tax rate for 2023 is lower primarily due to the partial reversal of the valuation allowance related to our foreign tax credits based on our determination that it is more likely than not that the benefit will be realized.

Gain on disposal of discontinued business, net of income taxes increased $4 million during 2023 compared with 2022 primarily resulting from the release of an expired guarantee related to the sale of the European vacation rentals business in 2023.

As a result of these items, Net income attributable to Travel + Leisure Co. shareholders increased $39 million in 2023 as compared with 2022.

The tables below present our segment information, followed by a discussion of each segment’s 2023 results compared to 2022 (in millions):

(a)Includes the elimination of transactions between segments.

(b)Includes $2 million and $3 million of stock-based compensation expense for the years ended December 31, 2023 and 2022 associated with the 2023 and 2022 restructuring plans.

(c)Includes $1 million of inventory impairments for the years ended December 31, 2023 and 2022, included in Cost of vacation ownership interests on the Consolidated Statements of Income.

(d)Includes expenses related to COVID-19 testing and other expenses associated with our return-to-work program in 2022.

Vacation Ownership

Net revenues increased $206 million and Adjusted EBITDA increased $64 million during 2023 compared with 2022. The net revenue growth was unfavorably impacted by foreign currency of $6 million (0.2%) and Adjusted EBITDA growth was unfavorably impacted by foreign currency of $3 million (0.5%).

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The net revenue growth excluding the impact of foreign currency was primarily driven by:

•$149 million increase in gross VOI sales, net of Fee-for-Service sales, due to increased tours, partially offset by a decrease in VPG due to higher mix of new owner tours (52% in the current year compared to 45% in the same period of 2022) which generally produce lower sales volume and lower close rates;

•$52 million increase in property management revenues primarily due to higher management fees and reimbursable revenues;

•$22 million increase in other revenues due to higher VOI travel package and incentive revenues;

•$21 million increase in consumer financing revenues primarily due to a higher average portfolio balance; and

•$15 million increase in commission revenues due to the volume of VOI Fee-for-Service sales.

These increases were partially offset by a $47 million increase in our provision for loan losses primarily due to higher gross VOI sales, net of Fee-for-Service sales.

In addition to the revenue change explained above, Adjusted EBITDA was further impacted by:

•$61 million increase in marketing costs in support of increased tour flow and new owner mix;

•$45 million increase in property management expenses due to higher reimbursable resort operating costs and expenses;

•$32 million increase in consumer financing interest expense primarily due to an increased weighted average coupon rate;

•$31 million increase in sales and commission expenses due to higher gross VOI sales, net of Fee-for-Service sales; and

•$8 million increase in other operating expenses due to higher VOI travel package and incentive expenses.

These increases were partially offset by a $24 million decrease in the cost of VOIs sold primarily due to estimated recoveries associated with the aforementioned provision increase and product mix, and a $19 million decrease in general and administrative expenses due to lower professional fees and employee related costs.

Travel and Membership

Net revenues decreased $24 million and Adjusted EBITDA decreased $21 million during 2023 compared with 2022. The net revenue decrease was unfavorably impacted by foreign currency of $1 million (0.1%) and the Adjusted EBITDA decrease was unfavorably impacted by foreign currency of $5 million (1.9%).

The decrease in net revenues excluding the impact of foreign currency was primarily driven by lower transactions, partially offset by increased revenue per transaction. Transactions were impacted by an increasing mix of exchange members with a club affiliation. who have a lower transaction propensity.

In addition to the revenue change explained above, Adjusted EBITDA excluding the impact of foreign currency was further impacted by:

•$7 million decrease in cost of sales primarily associated with lower transactions; partially offset by heavier weighting of rentals in Exchange’s revenue mix; and a

•$5 million decrease in marketing costs; partially offset by a

•$5 million increase in other operating costs primarily related to business development activities.

Corporate and other

Corporate and other revenue increased $1 million during 2023 compared with 2022 primarily due to $5 million of fees charged for managing an insurance program on behalf of homeowners associations; partially offset by a $4 million increase in eliminated transactions between segments.

Adjusted EBITDA increased $6 million (8.1%) during 2023 compared with 2022 and was not materially impacted by foreign currency. The growth in Adjusted EBITDA was primarily due to $5 million of fees charged for managing an insurance program on behalf of homeowners associations.

For a comparative review of our consolidated results of operations and those of our reportable segments for the fiscal years ended December 31, 2022 and 2021, refer to Part II, Item 7 of our Annual Report on Form 10-K filed with the SEC on February 22, 2023.

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DISCONTINUED OPERATIONS

During 2023 and 2022, we recognized $5 million and $1 million Gains on disposal of discontinued business, net of income taxes. During 2021, we recognized a Loss on disposal of discontinued business, net of income taxes of $5 million.

During 2022, we had $5 million of Net cash used in investing activities from discontinued operations on the Consolidated Statements of Cash Flows. See Note 6—Discontinued Operations to the Consolidated Financial Statements for additional information.

RESTRUCTURING PLANS

2023 Restructuring Plan

We incurred $26 million of restructuring charges during the year ended December 31, 2023. These actions were primarily focused on enhancing organizational efficiency and rationalizing operations. These charges included personnel-related costs resulting from a reduction of approximately 250 employees and other expenses. As part of this restructuring plan, we also decided to decrease our facilities by closing our owned office in Indianapolis, Indiana, and exiting other leased locations. The charges consisted of (i) $11 million of personnel-related costs at the Travel and Membership segment, (ii) $9 million of personnel-related costs and $1 million of lease costs at the Vacation Ownership segment, and (iii) $5 million of personnel-related costs at our corporate operations. These restructuring charges included $2 million of accelerated stock-based compensation expense. Substantially all initiative and related expenses have been incurred as of December 31, 2023.

2022 Restructuring Plan

We incurred $14 million of restructuring charges during the year ended December 31, 2022. These charges were associated with certain positions that were made redundant based upon changes to our organizational structure, primarily within the Travel and Membership segment. The charges consisted of (i) $9 million of personnel costs at the Travel and Membership segment, (ii) $3 million of lease and personnel-related costs at the Vacation Ownership segment, and (iii) $2 million of personnel-related costs at our corporate operations. These restructuring charges included $3 million of accelerated stock-based compensation expense.

See Note 26—Restructuring to the Consolidated Financial Statements for additional details of our restructuring activities.

FINANCIAL CONDITION

Total assets decreased $19 million from December 31, 2022 to December 31, 2023, due to:

•$268 million decrease in Cash and cash equivalents primarily driven by $400 million repayment of the 3.90% secured notes during the first quarter of 2023, $309 million of payments for share repurchases, $136 million of dividend payments, $74 million of property and equipment additions, $22 million of payments relating to debt issuances/modifications, and $15 million payment associated with the acquisition of the Travel + Leisure brand partially offset by $350 million of net cash provided by operating activities, proceeds from $300 million of borrowings on the 2023 Incremental Term Loan B facility, and $103 million of net proceeds from non-recourse debt; and a

•$58 million decrease in Inventory driven by the sale of $133 million of VOI inventory and $16 million of net transfers of completed unregistered VOI inventory to property and equipment; partially offset by $88 million of inventory additions.

These decreases were partially offset by:

•$38 million increase in Restricted cash driven by a $14 million increase in escrow deposits, $13 million increase in restricted cash for securitizations, and $11 million increase in funds on deposit related to our insurance program;

•$19 million increase in Trade receivables, net driven by increased receivables associated with property management fees and reimbursable expenses;

•$157 million increase in Vacation ownership contract receivables, net, driven by $1.43 billion of VOI originations, partially offset by $924 million of principal collections and net provision for loan losses of $348 million;

•$27 million increase in Prepaid expenses driven by $17 million increase in prepaid marketing costs and $9 million increase in prepaid travel credits; and a

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•$70 million increase in Other assets driven by increases of $49 million of tax receivables; $19 million in non-trade receivables, $9 million in capitalized contract costs, $9 million increase in deferred costs, and a $7 million increase in assets held-for-sale, partially offset by $16 million of amortization of right-of-use assets and the release of $12 million of collateral assets.

Total liabilities decreased $6 million from December 31, 2022 to December 31, 2023, primarily due to:

•$69 million decrease in Accrued expenses and other liabilities primarily due to a $30 million decrease due to the relief of the inventory obligation in Las Vegas, Nevada, a $24 million decrease in lease liabilities, a $17 million decrease in accrued payroll and related costs primarily employee bonus and commissions, and a $15 million decrease in tax liabilities, partially offset by an $10 million increase in funds on deposit related to our insurance program; and a

•$94 million decrease in Debt driven by $400 million repayment of the 3.90% secured notes during the first quarter of 2023; partially offset by $300 million of borrowings on the 2023 Incremental Term Loan B facility.

These decreases were partially offset by a:

•$43 million increase in Deferred income driven primarily by deferred VOI trial package and incentive revenues; and a

•$98 million increase in Non-recourse vacation ownership debt primarily due to net borrowings.

Total deficit increased $13 million from December 31, 2022 to December 31, 2023, primarily due to $307 million of share repurchases and $137 million of dividends; partially offset by $396 million of Net income attributable to Travel + Leisure Co. shareholders and a $37 million increase in additional paid-in capital, primarily due to stock-based compensation.

LIQUIDITY AND CAPITAL RESOURCES

We believe that we have sufficient sources of liquidity to meet our expected ongoing short-term and long-term cash needs, including capital expenditures, operational and/or strategic opportunities, and expenditures for human capital, intellectual property, contractual obligations, off-balance sheet arrangements, and other such requirements. Our net cash from operations and cash and cash equivalents are key sources of liquidity along with our revolving credit facility, bank conduit facilities, and continued access to debt markets. We believe these anticipated sources of liquidity are sufficient to meet our expected ongoing short-term and long-term cash needs, including the repayment of our $300 million notes due in April 2024. Our discussion below highlights these sources of liquidity and how they have been utilized to support our cash needs.

Cash and Cash Equivalents

As of December 31, 2023, we had $282 million of Cash and cash equivalents, which includes highly-liquid investments with an original maturity of three months or less.

$1.0 Billion Revolving Credit Facility

We generally utilize our revolving credit facility to finance our short-term to medium-term business operations, as needed. The facility expires in October 2026 and had $998 million of available capacity as of December 31, 2023.

The revolving credit facility and term loan B facilities are subject to covenants including the maintenance of specific financial ratios as defined in the credit agreement. The financial ratio covenants consist of a minimum interest coverage ratio of no less than 2.50 to 1.0 as of the measurement date and a maximum first lien leverage ratio not to exceed 4.25 to 1.0 as of the measurement date. The interest coverage ratio is calculated by dividing consolidated EBITDA (as defined in the credit agreement) by consolidated interest expense (as defined in the credit agreement), both as measured on a trailing 12-month basis preceding the measurement date. The first lien leverage ratio is calculated by dividing consolidated first lien debt (as defined in the credit agreement) as of the measurement date by consolidated EBITDA (as defined in the credit agreement) as measured on a trailing 12-month basis preceding the measurement date. Our first lien leverage ratio determines the interest rate spread on revolver borrowings and fees associated with letters of credit, which subjects them to fluctuation.

As of December 31, 2023, our interest coverage ratio was 4.23 to 1.0 and our first lien leverage ratio was 3.40 to 1.0. These ratios do not include interest expense or indebtedness related to any qualified securitization financing (as defined in the credit agreement). As of December 31, 2023, we were in compliance with the financial covenants described above.

On March 30, 2023, we entered into the fourth amendment to the credit agreement governing our revolving credit facility and term loan B facilities. Through this amendment we exercised our early opt-in election to change the benchmark rate on the revolving credit facility and 2018 Term Loan B Facility due May 2025 from the USD London Interbank Offered Rate (“LIBOR”) to the Secured Overnight Financing Rate (“SOFR”). This change became effective on March 31, 2023, for both new borrowings and rollovers of then existing USD LIBOR based borrowings (except Base Rate borrowings) and eliminated our exposure to LIBOR.

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Secured Notes and Term Loan B facilities

We generally utilize borrowing via secured note issuances to meet our long-term financing needs. During 2022, we entered into the third amendment to the credit agreement governing our revolving credit facility and the original 2018 Term Loan B Facility which provided for the 2022 Incremental Term Loan B Facility of $300 million due 2029. On December 20, 2023 we further amended the credit agreement governing our revolving credit facility and term loan B facilities (“Fifth Amendment”). The Fifth Amendment refinanced $298 million of outstanding borrowings under the 2022 Incremental Term Loan B facility and included additional borrowings of $300 million. This new 2023 Incremental Term Loan B facility matures on December 14, 2029. These transactions reinforce our expectation that we will maintain adequate liquidity for the next year and beyond.

During 2023, we used net proceeds from the 2022 Incremental Term Loan B Facility, along with cash on hand, and borrowings under our revolving credit facility, to repay our $400 million notes which came due in March 2023. We expect to use net proceeds from the 2023 Incremental Term Loan B Facility, together with available cash on hand and revolving credit facility borrowings to repay our outstanding $300 million 5.65% secured notes due April 2024 and pay related fees and expenses. As of December 31, 2023, we had $3.56 billion of outstanding borrowings under our secured notes and term loan B facilities with maturities ranging from 2024 to 2030.

Non-recourse Vacation Ownership Debt

Our Vacation Ownership business finances certain of its VOCRs through (i) asset-backed conduit facilities and (ii) term asset-backed securitizations, all of which are non-recourse to us with respect to principal and interest. For the securitizations, we pool qualifying VOCRs and sell them to bankruptcy-remote entities, all of which are consolidated into the accompanying Consolidated Balance Sheets. We plan to continue using these sources to finance certain VOCRs. On September 26, 2023, we renewed our USD bank conduit facility, extending its term through September 2025. We believe that our USD bank conduit facility and our AUD/NZD bank conduit facility, with a term through December 2024, amounting to a combined capacity of $752 million ($388 million available as of December 31, 2023), along with our ability to issue term asset-backed securities, provide sufficient liquidity to finance the sale of VOIs beyond the next year.

We closed on securitization financings of $1.09 billion, $800 million, and $850 million during 2023, 2022, and 2021. These transactions positively impacted our liquidity and reinforce our expectation that we will maintain adequate liquidity for the next year and beyond.

Our liquidity position may be negatively affected by unfavorable conditions in the capital markets in which we operate or if our VOCR portfolios do not meet specified portfolio credit parameters. Our liquidity, as it relates to our VOCR securitization program, could be adversely affected if we were to fail to renew or replace our conduit facilities on their expiration dates, or if a particular receivables pool were to fail to meet certain ratios, which could occur in certain instances if the default rates or other credit metrics of the underlying VOCRs deteriorate. Our ability to sell securities backed by our VOCRs depends on the continued ability and willingness of capital market participants to invest in such securities.

Each of our non-recourse securitized term notes and the bank conduit facilities contain various triggers relating to the performance of the applicable loan pools. If the VOCR pool that collateralizes one of our securitization notes fails to perform within the parameters established by the contractual triggers (such as higher default or delinquency rates), there are provisions pursuant to which the cash flows for that pool will be maintained in the securitization as extra collateral for the note holders or applied to accelerate the repayment of outstanding principal to the note holders. As of December 31, 2023, all of our securitized loan pools were in compliance with applicable contractual triggers.

We may, from time to time, depending on market conditions and other factors, repurchase our outstanding indebtedness, whether or not such indebtedness trades above or below its face amount, for cash and/or in exchange for other securities or other consideration, in each case in open market purchases and/or privately negotiated transactions.

For additional details regarding our credit facilities, term loan B facilities, and non-recourse debt see Note 15—Debt to the Consolidated Financial Statements.

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Material Cash Requirements

The following table summarizes material future contractual obligations of our continuing operations (in millions). We plan to fund these obligations along with our other cash requirements, with net cash from operations, cash and cash equivalents, and through the use of our revolving credit facilities, bank conduit facilities, and continued access to debt markets.

(a)Represents required principal payments on notes, term loans, and finance leases.

(b)Represents required principal payments on debt that is securitized through bankruptcy-remote special purpose entities; the creditors of which have no recourse to us for principal and interest.

(c)Includes interest on debt and non-recourse debt; estimated using the stated interest rates.

(d)Includes $533 million for marketing related activities and $133 million for information technology activities.

(e)Excludes a $31 million liability for unrecognized tax benefits as it is not reasonably estimable to determine the periods in which such liability would be settled with the respective tax authorities.

In addition to the amounts shown in the table above and in connection with our separation from Cendant, we entered into certain guarantee commitments with Cendant (pursuant to our assumption of certain liabilities and our obligation to indemnify Cendant, Realogy (now Anywhere Real Estate Inc.), and Travelport for such liabilities) and guarantee commitments related to deferred compensation arrangements with Cendant and Realogy. We also entered into certain guarantee commitments and indemnifications related to the sale of our vacation rentals businesses. For information on matters related to our former parent and subsidiaries see Note 27—Transactions with Former Parent and Former Subsidiaries to the Consolidated Financial Statements.

In addition to the key contractual obligation and separation related commitments described above, we have the following other commercial commitments and off-balance sheet arrangements.

We enter into agreements that contain standard guarantees and indemnities whereby we indemnify another party for specified breaches of, or third-party claims relating to, an underlying agreement. Such underlying agreements are typically entered into by one of our subsidiaries. The various underlying agreements generally govern purchases, sales or outsourcing of products or services, leases of real estate, licensing of software and/or development of vacation ownership properties, customer data safeguards, access to credit facilities, derivatives, and issuances of debt securities. We also provide corporate guarantees for our operating business units relating to merchant credit-card processing for prepaid customer stays and other deposits. While a majority of these guarantees and indemnifications extend only for the duration of the underlying agreement, some survive the expiration of the agreement. We are not able to estimate the maximum potential amount of future payments to be made under these guarantees and indemnifications as the triggering events are not predictable. In certain cases we receive offsetting indemnifications from third-parties and/or maintain insurance coverage that may mitigate any potential payments.

Our Vacation Ownership business provides guarantees to certain owners’ associations for funds required to operate and maintain vacation ownership properties in excess of assessments collected from owners of the VOIs. We may be required to fund such a shortfall as a result of unsold company-owned VOIs or failure by owners to pay such assessments. In addition, from time to time, we may agree to reimburse certain owner associations up to 80% of their uncollected assessments. These guarantees extend for the duration of the underlying subsidy or similar agreement (which generally approximate one year and are renewable at our discretion on an annual basis). The maximum potential future payments that we could be required to make under these guarantees was $473 million as of December 31, 2023. We would only be required to pay this maximum amount if none of the assessed owners paid their assessments. Any assessments collected from the owners of the VOIs would reduce the maximum potential amount of future payments to be made by us. Additionally, should we be required to fund the deficit through the payment of any owners’ assessments under these guarantees, we would be permitted to use that property to engage in revenue-producing activities such as rentals. During 2023, 2022, and 2021, we made payments related to these guarantees of $12 million, $12 million, and $13 million. As of December 31, 2023 and 2022, we maintained a liability in connection with these guarantees of $21 million and $20 million included within Accrued expenses and other liabilities on the Consolidated Balance Sheets.

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As part of the Fee-for-Service program, we may guarantee to reimburse the developer or to purchase inventory from the developer, for a percentage of the original sale price if certain future conditions exist. As of December 31, 2023, the maximum potential future payments that we may be required to make under these guarantees is $61 million. As of December 31, 2023 and 2022, we had no recognized liabilities in connection with these guarantees.

We generally utilize letters of credit to support the securitization of VOCR fundings, certain insurance policies, and development activities in our Vacation Ownership business. As of December 31, 2023, we had $47 million of irrevocable standby letters of credit outstanding, $2 million of which were under our revolving credit facilities. As of December 31, 2022, we had $34 million of irrevocable standby letters of credit outstanding, none of which were under our revolving credit facilities.

We also utilize surety bonds in our Vacation Ownership business for sales and development transactions in order to meet regulatory requirements of certain states. In the ordinary course of our business, we have assembled commitments from 12 surety providers in the amount of $2.3 billion, of which we had $504 million outstanding as of December 31, 2023. The availability, terms and conditions, and pricing of bonding capacity are dependent on, among other things, continued financial strength and stability of the insurance company affiliates providing the bonding capacity, general availability of such capacity, and our corporate credit rating. If the bonding capacity is unavailable or, alternatively, the terms and conditions and pricing of the bonding capacity are unacceptable to us, our Vacation Ownership business could be negatively impacted.

We have company sponsored severance plans in place for certain employees in the event of involuntary terminations, other than for cause. As of December 31, 2023, our maximum obligation under these severance plans was $199 million. Refer to the Proxy Statement for our 2024 Annual Meeting of Shareholders under the captions “Compensation of Directors,” “Executive Compensation” and “Committees of the Board” for additional details regarding executive compensation.

Our secured debt is rated Ba3 with a “stable outlook” by Moody’s Investors Service, Inc., BB- with a “stable outlook” by Standard & Poor’s Rating Services, and BB+ with a “stable outlook” by Fitch Rating Agency. A security rating is not a recommendation to buy, sell or hold securities and is subject to revision or withdrawal by the assigning rating organization. Reference in this report to any such credit rating is intended for the limited purpose of discussing or referring to aspects of our liquidity and of our costs of funds. Any reference to a credit rating is not intended to be any guarantee or assurance of, nor should there be any undue reliance upon, any credit rating or change in credit rating, nor is any such reference intended as any inference concerning future performance, future liquidity or any future credit rating.

CASH FLOWS

The following table summarizes the changes in cash, cash equivalents, and restricted cash between 2023 and 2022 (in millions). For a comparative review of the fiscal years ended December 31, 2022 and 2021, refer to the Cash Flows section in Part II, Item 7 of our Annual Report on Form 10-K filed with the SEC on February 22, 2023.

Operating Activities

Net cash provided by operating activities was $350 million for the year ended December 31, 2023, compared to $442 million in the prior year. This $92 million decrease in 2023 was primarily attributable to an increase in cash utilized for working capital, including the impacts of the Sports Illustrated agreement and continued growth in our loan portfolio.

Investing Activities

Net cash used in investing activities from continuing operations increased $35 million during the year ended December 31, 2023. This increase was primarily driven by $22 million of higher property and equipment additions and $8 million of proceeds from the sale of investments in 2022.

Net cash used in investing activities from discontinued operations was $5 million during 2022, primarily related to the settlement of post-closing adjustment claims associated with the sale of the European vacation rentals business.

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Financing Activities

Net cash used in financing activities increased $304 million during the year ended December 31, 2023. This increase was primarily due to the $400 million repayment of the 3.90% secured notes during the first quarter of 2023 partially offset by higher net proceeds on non-recourse debt and decreased share repurchases in the current year.

Capital Deployment

We focus on deploying capital for the highest possible returns. Ultimately, our business objective is to grow our business while optimizing cash flow and Adjusted EBITDA. We intend to continue to invest in select capital and technological improvements across our business. We also regularly consider a wide array of potential acquisitions and other strategic transactions, including acquisitions of businesses and real property, joint ventures, business combinations, strategic investments, and dispositions. Any of these transactions could be material to our business. As part of this strategy, we have made, and expect to continue to make, proposals and enter into non-binding letters of intent, allowing us to conduct due diligence on a confidential basis. A potential transaction contemplated by a letter of intent may never reach the point where we enter into a definitive agreement, nor can we predict the timing of such a potential transaction. Finally, we intend to continue to return value to shareholders through the repurchase of common stock and payment of dividends. All future declarations of quarterly cash dividends and increases to the capacity of our share repurchase program are subject to final approval by the Board of Directors (“Board”).

During 2023, we spent $100 million on vacation ownership development projects (inventory). We believe that our Vacation Ownership business currently has adequate finished inventory to support vacation ownership sales for several years. As such, we expect to remain below historical levels of spending for vacation ownership development projects in 2024 with anticipated spending between $105 million and $125 million. After factoring in the anticipated additional annual spending, we expect to have adequate inventory to support vacation ownership sales through at least the next four to five years.

During 2023, we spent $74 million on capital expenditures, primarily for information technology and sales center improvement projects. During 2024, we anticipate spending between $80 million and $90 million on capital expenditures, primarily for continuation of information technology digital initiatives, sales center facility and related system enhancements and resort improvements.

In connection with our focus on optimizing cash flow, we are continuing our asset-light efforts in vacation ownership by seeking opportunities with financial partners whereby they make strategic investments to develop assets on our behalf. We refer to this as Just-in-Time. The partner may invest in new ground-up development projects or purchase from us, for cash, existing in-process inventory which currently resides on our Consolidated Balance Sheets. The partner will complete the development of the project and we may purchase finished inventory at a future date as needed or as obligated under the agreement.

We expect that the majority of the expenditures that will be required to pursue our capital spending programs, strategic investments, and vacation ownership development projects will be financed with cash flow generated through operations and cash and cash equivalents. We expect that additional expenditures will be financed with general secured corporate borrowings, including through the use of available capacity under our revolving credit facility.

Share Repurchase Program

On August 20, 2007, our Board authorized a share repurchase program that enables us to purchase our common stock. As of December 31, 2023, the Board has increased the capacity of the program nine times, most recently in April 2022 by $500 million, bringing the total authorization under the current program to $6.5 billion. Proceeds received from stock option exercises have increased the repurchase capacity by $81 million since the inception of this program. We had $170 million of remaining availability in our program as of December 31, 2023.

Under our current share repurchase program, we repurchased 7.8 million shares at an average price of $39.11 for a cost of $307 million during the year ended December 31, 2023. The amount and timing of specific repurchases are subject to market conditions, applicable legal requirements and other factors, including capital allocation priorities. Repurchases may be conducted in the open market or in privately negotiated transactions.

Dividends

We paid cash dividends of $0.45 per share for all four quarters of 2023 and $0.40 per share for all four quarters of 2022. During 2021, we paid cash dividends of $0.30 per share for the first, second, and third quarters, and $0.35 per share for the fourth quarter. The aggregate dividends paid to shareholders for 2023, 2022, and 2021 were $136 million, $135 million, and $109 million.

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Our long-term plan is to grow our dividend at the rate of growth of our earnings at a minimum. The declaration and payment of future dividends to holders of our common stock are at the discretion of our Board and depend upon many factors, including our financial condition, earnings, capital requirements of our business, covenants associated with certain debt obligations, legal requirements, regulatory constraints, industry practice and other factors that our Board deems relevant. There is no assurance that a payment of a dividend or a dividend at current levels will occur in the future.

Foreign Earnings

We assert that substantially all undistributed foreign earnings will be reinvested indefinitely as of December 31, 2023. In the event we determine not to continue to assert that all or part of our undistributed foreign earnings are permanently reinvested, such a determination in the future could result in the accrual and payment of additional foreign withholding taxes, as well as U.S. taxes on currency transaction gains and losses, the determination of which is not practicable.

SEASONALITY

We experience seasonal fluctuations in our net revenues and net income from sales of VOIs and vacation exchange fees. Revenue from sales of VOIs is generally higher in the third quarter than in other quarters due to increased leisure travel. Revenue from vacation exchange fees is generally highest in the first quarter, which is typically when members of our vacation exchange business book their vacations for the year.

The seasonality of our business may cause fluctuations in our quarterly operating results. As we expand into new markets and geographical locations, we may experience increased or different seasonality dynamics that create fluctuations in operating results different from the fluctuations we have experienced in the past.

COMMITMENTS AND CONTINGENCIES

From time to time, we are involved in claims, legal and regulatory proceedings, and governmental inquiries related to our business, none of which, in the opinion of management, is expected to have a material effect on our results of operations or financial condition. See Note 19—Commitments and Contingencies to the Consolidated Financial Statements for a description of claims and legal actions arising in the ordinary course of our business along with our guarantees and indemnifications and Note 27—Transactions with Former Parent and Former Subsidiaries to the Consolidated Financial Statements for a description of our obligations regarding Cendant contingent litigation, matters related to Wyndham Hotels, and matters related to the vacation rentals businesses.

CRITICAL ACCOUNTING ESTIMATES

In presenting our financial statements in conformity with GAAP, we are required to make estimates and assumptions that affect the amounts reported therein. Several of the estimates and assumptions we are required to make relate to matters that are inherently uncertain as they pertain to future events. However, events that are outside of our control cannot be predicted and, as such, they cannot be contemplated in evaluating such estimates and assumptions. If there is a significant unfavorable change to current conditions, it could result in a material impact to our consolidated results of operations, financial position, and liquidity. We believe that the estimates and assumptions we used when preparing our financial statements were the most appropriate at that time. In addition to our significant accounting policies referenced in Note 2—Summary of Significant Accounting Policies to the Consolidated Financial Statements, presented below are the critical accounting estimates that we believe require subjective and complex judgments that could potentially affect reported results.

Vacation Ownership Revenue Recognition and Allowance for Loan Losses. Our sales of VOIs are either cash sales or developer-financed sales. For developer-financed sales, we project our losses for uncollectible accounts over the entire lives of our notes. This estimate of uncollectible consideration reduces the amount of revenue recognized at the time of sale and establishes an allowance for loan loss which reduces the receivable.

Our estimates of uncollectible amounts are based on the results of our static pool analysis which tracks defaults for each year’s sales over the entire life of those contract receivables. We consider current defaults, past due aging, historical write-offs of contracts and consumer credit scores (FICO scores) in the assessment of a borrower’s credit strength, down payment amount and expected loan performance. We also consider whether the historical economic conditions are comparable to current economic conditions. If current or expected future conditions differ from the conditions in effect when the historical experience was generated, we adjust the allowance for loan losses to reflect the expected effects of the current environment on the collectability of our VOCRs. There were no changes to the assumptions used in this model in 2023.

Changes in our estimates of uncollectible amounts could result in a material impact to our allowance for loan losses. A one percent change in projected losses would increase our allowance for loan losses by approximately $6 million. See Note 9—

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Vacation Ownership Contract Receivables to the Consolidated Financial Statements for additional details of our allowance for loan losses.

Inventory. We use the relative sales value method of costing and relieving our VOI inventory. This method requires us to make estimates subject to significant uncertainty, including future sales prices and volumes as well as credit losses and related inventory recoveries. The impact of any changes in estimates under the relative sales value method is recorded in Cost of vacation ownership interests on the Consolidated Statements of Income in order to retrospectively adjust the margin previously recorded subject to those estimates. There were no changes in these assumptions during 2023.

Impairment of Long-Lived Assets. We perform an annual review of our goodwill and other indefinite-lived intangible assets, or more frequently if indicators of potential impairment exist. This analysis requires significant judgments, including anticipated market conditions, operating expense trends, estimation of future cash flows, which are dependent on internal forecasts, and estimation of long-term rate of growth. The estimates used to calculate the fair value of other indefinite-lived intangible assets change from year to year based on operating results and market conditions. There were no changes in the assumptions used in this analysis in 2023. Changes in these estimates and assumptions could materially affect the determination of fair value and the other indefinite-lived intangible assets impairment.

Business Combinations. A component of our growth strategy has been to acquire and integrate businesses that complement our existing operations. We account for business combinations in accordance with the guidance for business combinations and related literature. Accordingly, we allocate the purchase price of acquired companies to the tangible and intangible assets acquired and liabilities assumed based upon their estimated fair values at the date of purchase, with the exception of contract assets and contract liabilities with a customer acquired in a business combination, for business combinations that occurred in 2022 or later. For these transactions we recognize and measure those contracts as though we had entered into the agreement with the customer as of the same date as the acquiree. This generally will result recognizing contract assets and contract liabilities at amounts consistent with those recorded by the acquiree immediately before the acquisition date. The difference between the purchase price and the fair value of the net assets acquired is recorded as goodwill.

In determining the fair values of assets acquired and liabilities assumed in a business combination, we use various recognized valuation methods including present value modeling and referenced market values (where available). Further, we make assumptions within certain valuation techniques including discount rates and timing of future cash flows. Valuations are performed by management or independent valuation specialists under management’s supervision, where appropriate. We believe that the estimated fair values assigned to the assets acquired and liabilities assumed are based on reasonable assumptions that marketplace participants would use. However, such assumptions are inherently uncertain and actual results could differ from those estimates.

Guarantees. In the ordinary course of business, we enter into agreements that contain standard guarantees and indemnities whereby we indemnify another party for specified breaches of, or third-party claims relating to, an underlying agreement. Such underlying agreements are typically entered into by one of our subsidiaries. The various underlying agreements generally govern purchases, sales or outsourcing of products or services, leases of real estate, licensing of software and/or development of vacation ownership properties, access to credit facilities, derivatives and issuances of debt securities. Also in the ordinary course of business, we provide corporate guarantees for our operating business units relating to merchant credit-card processing for prepaid customer stays and other deposits. While a majority of these guarantees and indemnifications extend only for the duration of the underlying agreement, some survive the expiration of the agreement. We are not able to estimate the maximum potential amount of future payments to be made under these guarantees and indemnifications as the triggering events are not predictable. In certain cases, we maintain insurance coverage that may mitigate any potential payments.

Income Taxes. We regularly review our deferred tax assets to assess their potential realization and establish a valuation allowance for portions of such assets that we believe will not be ultimately realized. In performing this review, we make estimates and assumptions regarding projected future taxable income, the expected timing of the reversals of existing temporary differences and the implementation of tax planning strategies. 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 impact our results of operations.

For tax positions we have taken or expect to take in our tax return, we apply a more likely than not threshold, under which we must conclude a tax position is more likely than not to be sustained, assuming that the position will be examined by the appropriate taxing authority that has full knowledge of all relevant information, in order to recognize or continue to recognize the benefit. In determining our provision for income taxes, we use judgment, reflecting our estimates and assumptions, in applying the more likely than not threshold.

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ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

BUSINESS AND OVERVIEW

We are a global provider of hospitality services and travel products and operate our business in the following two segments:

•Vacation Ownership — develops, markets and sells vacation ownership interests (“VOIs”) to individual consumers, provides consumer financing in connection with the sale of VOIs, and provides property management services at resorts. This segment is wholly comprised of our Wyndham Destinations business line.

•Travel and Membership — operates a variety of travel businesses, including three vacation exchange brands, travel technology platforms, travel memberships, and direct-to-consumer rentals. This segment is comprised of our Exchange and Travel Club business lines.

Inflation Reduction Act

On August 16, 2022, the United States enacted the Inflation Reduction Act. Among other provisions, this new law imposes a 15% minimum tax rate for large corporations with more than $1.0 billion of adjusted financial statement income over a three-year period, and a 1% excise tax on stock buybacks. These changes will become effective for the 2023 tax year. We do not currently expect to be subject to the minimum tax, but we will continue to monitor as this could change. We are subject to the 1% excise tax to the extent of future share repurchases. We are still evaluating the impact of the other provisions on our business.

Travel + Leisure Brand Acquisition

On January 5, 2021, Wyndham Destinations, Inc. acquired the Travel + Leisure brand and related assets from Dotdash Meredith (formerly Meredith Corporation) for $100 million, of which $55 million was paid during 2021 and $20 million paid during 2022. The remaining payments will be completed by June 2024. This acquisition included Travel + Leisure branded travel clubs and members. We acquired the Travel + Leisure brand to accelerate our strategic plan to broaden our reach with the launch of new travel services, expand our membership travel business, and amplify the global visibility of our leisure travel products. Dotdash Meredith will continue to operate and monetize Travel + Leisure branded multi-platform media assets across multiple channels under a 30-year royalty-free, renewable licensing relationship. In connection with this acquisition, on February 17, 2021, Wyndham Destinations, Inc. was renamed Travel + Leisure Co. and trades on the New York Stock Exchange under the ticker symbol TNL.

Economic Conditions and Key Business Trends

The results of operations for the years ended December 31, 2022, 2021, and 2020 include impacts related to the novel coronavirus global pandemic (“COVID-19”). While significantly negative for the travel industry, our company, our customers, and our employees during its earlier stages, COVID-19 had a substantially lower impact on our results of operations during 2022. See Note 24—COVID-19 Related Items to the Consolidated Financial Statements for additional details on the impact COVID-19 had on our business.

Although our business saw strong demand for leisure travel as we continued to recover from the impacts of COVID-19, recent inflationary pressures, rising interest rates, and risk of recession inherently result in uncertainty in business trends and consumer behavior. We have experienced trends of increased gross VOI sales, including sales to new owners, tours, and volume per guest (“VPG”). In addition to the demand for leisure travel, VPG also benefited from changes we made to our consumer credit quality marketing criteria. These changes are intended to strengthen sales efficiencies as well as the performance of our vacation ownership contract receivables portfolio. As we seek to increase the mix of new owner sales and expand our pipeline of potential future owner upgrade sales, we would expect VPG levels to moderate. Our current VOI inventory levels are expected to be sufficient to support sales during the near term, which limits our exposure to increased inventory costs due to the potential effects of inflation. Higher interest rates negatively impacted our interest expense in 2022 and, if interest rates remain elevated, we expect this trend to continue. Although we are not currently seeing meaningful signs of a slowdown in leisure travel demand, we are monitoring economic conditions. Our vacation ownership business and to a greater extent, our travel and membership businesses, are highly dependent on the health of the travel industry and we are subject to the other risks and uncertainties discussed in “Risk Factors” in Part I, Item 1A of this Annual Report filed on Form 10-K.

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SEGMENT OVERVIEW

Vacation Ownership

We develop, market, and sell VOIs to individual consumers, provide consumer financing in connection with the sale of VOIs, and provide property management services at resorts. Our sales of VOIs are either cash sales or developer-financed sales. Developer-financed sales are typically collateralized by the underlying VOI. Revenue is recognized on VOI sales upon transfer of control, which is defined as the point in time when a binding sales contract has been executed, the financing contract has been executed for the remaining transaction price, the statutory rescission period has expired, and the transaction price has been deemed to be collectible.

For developer-financed sales, we reduce the VOI sales transaction price by an estimate of uncollectible consideration at the time of the sale. Our estimates of uncollectible amounts are based largely on the results of our static pool analysis which relies on historical payment data by customer class.

In connection with entering into a VOI sale, we may provide our customers with certain non-cash incentives, such as credits for future stays at our resorts. For those VOI sales, we bifurcate the sale and allocate the sales price between the VOI sale and the non-cash incentive. Non-cash incentives generally have expiration periods of 18 months or less and are recognized at a point in time upon transfer of control.

We provide day-to-day property management services including oversight of housekeeping services, maintenance, and certain accounting and administrative services for property owners’ associations and clubs. These services may also include reservation and resort renovation activities. Such agreements are generally for terms of one year or less, and are renewed automatically on an annual basis. Our management agreements contain cancellation clauses, which allow for either party to cancel the agreement, by either a majority board vote or a majority vote of non-developer interests. We receive fees for such property management services which are collected monthly in advance and are based upon total costs to operate such resorts (or as services are provided in the case of resort renovation activities). Fees for property management services typically approximate 10% of budgeted operating expenses. We are entitled to consideration for reimbursement of costs incurred on behalf of the property owners’ association in providing management services (“reimbursable revenue”). These reimbursable costs principally relate to the payroll costs for management of the associations, club and resort properties where we are the employer and are reflected as a component of Operating expenses on the Consolidated Statements of Income/(Loss). We reduce our management fees for amounts paid to the property owners’ association that reflect maintenance fees for VOIs for which we retain ownership, as we have concluded that such payments are consideration payable to a customer. Property management fee revenues are recognized when the services are performed and are recorded as a component of Service and membership fees on the Consolidated Statements of Income/(Loss).

Within our Vacation Ownership segment, we measure operating performance using the following key operating statistics: (i) gross VOI sales including sales under our Fee-for-Service program before the effect of loan loss provisions, (ii) tours, which represents the number of tours taken by guests in our efforts to sell VOIs, and (iii) volume per guest, which measures the efficiency of this business’ tour selling efforts, is calculated by dividing the gross VOI sales (excluding telesales and virtual sales) by the number of tours. We have excluded non-tour sales in the calculation of VPG because they are generated by a different marketing channel.

Travel and Membership

We are primarily a fee-for-service business deriving a majority of our revenues from membership dues and fees for facilitating members’ trading of their timeshare intervals. Revenues from membership dues represent the fees paid by members or affiliated clubs on their behalf. We recognize revenues from membership dues paid by the member on a straight-line basis over the membership period as the performance obligations are fulfilled through delivery of publications, if applicable, and by providing access to travel-related products and services. Estimated net contract consideration payable by affiliated clubs for memberships is recognized as revenue over the term of the contract with the affiliated club in proportion to the estimated average monthly member count. Such estimates are adjusted periodically for changes in the actual and forecasted member activity. For additional fees, members have the right to exchange their intervals for intervals at other properties affiliated with our vacation exchange networks and, for certain members, for other leisure-related services and products. We also derive revenue from facilitating bookings of travel accommodations for both members and non-members. Revenue is recognized when these transactions have been confirmed, net of expected cancellations.

As a provider of vacation exchange services, we enter into affiliation agreements with developers of vacation ownership properties to allow owners of VOIs to trade their intervals for intervals at other properties affiliated with our vacation exchange network and, for some members, for other leisure-related services and products.

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Our vacation exchange business also derives revenues from programs with affiliated resorts, club servicing, and loyalty programs; and additional exchange-related products that provide members with the ability to protect trading power or points, extend the life of deposits, and combine two or more deposits for the opportunity to exchange into intervals with higher trading power. Revenues for other vacation exchange-related product fees are deferred and recognized upon the occurrence of a future exchange, event, or other related transaction.

We earn revenue from our RCI Elite Rewards co–branded credit card program, which is primarily generated by cardholder spending and the enrollment of new cardholders. The advance payments received under the program are recognized as a contract liability until our performance obligations have been satisfied. The primary performance obligation for the program relates to brand performance services. Total contract consideration is estimated and recognized on a straight-line basis over the contract term.

Within our Travel and Membership segment, we measure operating performance using the following key operating statistics: (i) average number of exchange members, which represents paid members in our vacation exchange programs who are considered to be in good standing; (ii) transactions, which represents the number of exchanges and travel club bookings recognized as revenue during the period, net of cancellations; and (iii) revenue per transaction, which represents transaction revenue divided by transactions. Transactions and revenue per transaction are provided in two categories: Exchange, which is primarily RCI, and Travel Club.

Other Items

We record property management service revenues for our Vacation Ownership segment and RCI Elite Rewards revenues for our Travel and Membership segment gross as a principal.

RESULTS OF OPERATIONS

We have two reportable segments: Vacation Ownership and Travel and Membership. Due to changes in organizational structure in the second quarter of 2022, the management of the Extra Holidays business was transitioned to the Vacation Ownership segment. As such, we reclassified the results of the Extra Holidays business, which was previously reported within the Travel and Membership segment, into the Vacation Ownership segment. Prior period segment information has been updated to reflect this change. The reportable segments presented below are those for which discrete financial information is available and which are utilized on a regular basis by the chief operating decision maker to assess performance and to allocate resources. In identifying our reportable segments, we also consider the nature of services provided by the operating segments. Management uses net revenues and Adjusted EBITDA to assess the performance of the reportable segments. We define Adjusted EBITDA as Net income/(loss) from continuing operations before depreciation and amortization, interest expense (excluding consumer financing interest), early extinguishment of debt, interest income (excluding consumer financing revenues) and income taxes. Adjusted EBITDA also excludes stock-based compensation costs, separation and restructuring costs, legacy items, transaction costs for acquisitions and divestitures, asset impairments/recoveries, gains and losses on sale/disposition of business, and items that meet the conditions of unusual and/or infrequent. Legacy items include the resolution of and adjustments to certain contingent assets and liabilities related to acquisitions of continuing businesses and dispositions, including the separation of Wyndham Hotels & Resorts, Inc. (“Wyndham Hotels”) and Cendant, and the sale of the vacation rentals businesses. We believe that Adjusted EBITDA is a useful measure of performance for our segments which, when considered with generally accepted accounting principles in the United States (“GAAP”) measures, gives a more complete understanding of our operating performance. Our presentation of Adjusted EBITDA may not be comparable to similarly-titled measures used by other companies.

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OPERATING STATISTICS

The table below presents our operating statistics for the years ended December 31, 2022 and 2021. These operating statistics are the drivers of our revenues and therefore provide an enhanced understanding of our businesses. Refer to The Year Ended December 31, 2022 vs. the Year Ended December 31, 2021 section for a discussion on how these operating statistics affected our business for the periods presented.

(a)Represents total sales of VOIs, including sales under the Fee-for-Service program before the effect of loan loss provisions. We believe that Gross VOI sales provides an enhanced understanding of the performance of our Vacation Ownership business because it directly measures the sales volume of this business during a given reporting period.

(b)Represents the number of tours taken by guests in our efforts to sell VOIs.

(c)VPG is calculated by dividing Gross VOI sales (excluding telesales and virtual sales) by the number of tours. We have excluded non-tour sales in the calculation of VPG because they are generated by a different marketing channel. We believe that VPG provides an enhanced understanding of the performance of our Vacation Ownership business because it directly measures the efficiency of this business’ tour selling efforts during a given reporting period.

(d)Includes the impact of acquisitions from the acquisition dates forward.

(e)Represents the number of exchanges and travel club bookings recognized as revenue during the period, net of cancellations. In 2022, the Travel and Membership segment determined that the presentation of this performance measure for Travel Club would be more reflective of how members use the club if it included add-on vacation travel bookings, such as car rentals. This update is reflected in all periods presented.

(f)In 2022, the Travel and Membership segment determined that certain rental transactions for travelers that were not RCI members are more closely aligned with Travel Club transactions (previously “Non-exchange”). Prior period results reflect the reclassification of this activity from Exchange to Travel Club.

(g)Represents transaction revenue divided by transactions.

(h)Represents paid members in our vacation exchange programs who are considered to be in good standing.

(i)Percentage change may not calculate due to rounding.

(j)The following table provides a reconciliation of Vacation ownership interest sales, net to Gross VOI sales (in millions):

(1)     Represents total sales of VOIs through our Fee-for-Service programs where inventory is sold through our sales and marketing channels for a commission. Fee-for-Service commission revenues were $116 million and $101 million for the years ended December 31, 2022 and 2021. These commissions are reported within Service and membership fees on the Consolidated Statements of Income/(Loss).

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THE YEAR ENDED DECEMBER 31, 2022 VS. THE YEAR ENDED DECEMBER 31, 2021

Our consolidated results are as follows (in millions):

During 2021 we analyzed the adequacy of the COVID-19 related allowance consistent with past methodology, and as a result of improvements in net new defaults, we reduced this allowance resulting in a $91 million increase in revenues with a corresponding $33 million increase in Cost of vacation ownership interests representing the associated reduction in estimated recoveries. The net positive impact of the COVID-19 related allowance release on Adjusted EBITDA was $58 million for 2021.

Net revenues increased $433 million during 2022 compared with 2021. This increase was unfavorably impacted by foreign currency of $15 million (0.5%). Excluding the impacts of foreign currency and the COVID-19 related allowance adjustments discussed above, the increase in net revenues was primarily the result of:

•$512 million of increased revenues at our Vacation Ownership segment primarily due to an increase in net VOI sales as a result of increased tours due to the ongoing recovery of our operations from the impact of COVID-19 and higher VPG, along with higher property management revenues due to higher property management fees and reimbursable revenues; and

•$27 million increased revenues at our Travel and Membership segment driven by higher transaction revenues and subscription revenues as a result of increased marketing and business development efforts, as well as the continued recovery from the impacts of COVID-19.

Expenses increased $398 million during 2022 compared with 2021. This increase was favorably impacted by foreign currency of $11 million (0.4%). Excluding the impacts of foreign currency and the Cost of vacation ownership interest related to the COVID-19 allowance adjustments discussed above the increase in expenses was the result of:

•$128 million increase in sales and commission expenses at the Vacation Ownership segment due to higher gross VOI sales, net of Fee-for-Service sales;

•$90 million increase in marketing costs in support of increased tour flow, new owner mix and Travel Club transactions;

•$59 million increase in property management expenses due to higher reimbursable resort operating costs and expenses;

•$45 million increase in general and administrative expenses primarily due to higher employee-related costs and legal fees;

•$34 million increase in the cost of VOIs sold primarily due to higher gross VOI sales;

•$28 million increase in maintenance fees on unsold inventory;

•$18 million increase in cost of sales at the Travel and Membership segment in support of higher Travel Club transaction revenue;

•$15 million increase in impairments primarily due to the loss on sale of property in the current year and asset recoveries recognized in the prior year;

•$15 million increase in restructuring charges driven by the elimination of certain positions which were made redundant based upon changes to the organizational structure;

•$11 million increase in sales and commission expenses as a result of the mix of VOI Fee-for-Service sales; and

•$9 million increase in other operating costs at the Travel and Membership segment in support of the new travel club launches.

Interest expense decreased $3 million during 2022 compared with 2021 primarily due to lower average outstanding debt balance in 2022.

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Interest income increased $3 million during 2022 compared with 2021 primarily due to higher interest rates on short-term investments.

Other income, net of other expense increased $16 million during 2022 compared with 2021, primarily due to a $10 million reduction of contingent consideration associated with a business acquisition.

Our effective tax rates were 26.7% and 27.0% for the years ended December 31, 2022 and 2021. Our effective tax rate for 2022 is slightly lower primarily due to a reduction in state income taxes, partially offset by a reversal of a prior year tax receivable due to a statute of limitation expiration and a tax deficiency from stock-based compensation in the current year.

During 2022, we recognized a gain on disposal of discontinued business, net of income taxes of $1 million driven by tax refunds related to the sale of the European vacation rentals business. During 2021 we recognized a loss on disposal of discontinued business, net of income taxes of $5 million resulting from a settlement agreement for post-closing adjustment claims related to this sale.

As a result of these items, Net income attributable to Travel + Leisure Co. shareholders increased $49 million in 2022 as compared with 2021.

The tables below present our segment information, followed by a discussion of each segment’s 2022 results compared to 2021 (in millions):

(a)Includes the elimination of transactions between segments.

(b)Includes $3 million of stock-based compensation expense for the year ended December 31, 2022 associated with the 2022 restructuring plans.

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(c)Includes $1 million of inventory impairments for the year ended December 31, 2022, included in Cost of vacation ownership interests on the Consolidated Statements of Income/(Loss).

(d)Includes expenses related to COVID-19 testing and other expenses associated with our return-to-work program in 2022. In 2021, this includes severance and other employee costs associated with layoffs due to the COVID-19 workforce reduction; offset in part by U.S. and international government employee retention credits.

Vacation Ownership

Net revenues increased $412 million and Adjusted EBITDA increased $96 million during 2022 compared with 2021. The net revenue increase was unfavorably impacted by foreign currency of $9 million (0.4%) and the Adjusted EBITDA increase was unfavorably impacted by foreign currency of $3 million (0.5%).

The net revenue increase excluding the impact of foreign currency was primarily driven by:

•$486 million increase in gross VOI sales, net of Fee-for-Service sales, due to increased tours associated with the ongoing recovery of our operations from the impact of COVID-19 and higher VPG due to strong close rates and higher quality tours;

•$68 million increase in property management revenues primarily due to higher management fees and reimbursable revenues;

•$17 million increase in commission revenues due to the volume of VOI Fee-for-Service sales; and

•$14 million increase in other revenues due to higher VOI travel package and incentive revenue.

These increases were partially offset by a $173 million increase in our provision for loan losses primarily due to higher gross VOI sales, a 300 basis point increase in sales financed compared to the prior year, and the absence of the prior year $91 million partial release of the COVID-19 related allowance. The increase in percentage of sales financed is in line with our strategic decision to grow our portfolio in pursuit of higher consumer financing revenue in exchange for the incremental increase in the provision for loan losses associated with incremental vacation ownership contract receivable (“VOCR”) originations.

In addition to the drivers above, Adjusted EBITDA excluding the impact of foreign currency was further impacted by:

•$128 million increase in sales and commission expenses due to higher gross VOI sales, net of Fee-for-Service sales;

•$88 million increase in marketing costs in support of increased tour flow and new owner mix;

•$59 million increase in property management expenses due to higher reimbursable resort operating costs and expenses;

•$28 million increase in maintenance fees on unsold inventory;

•$21 million increase in general and administrative expenses primarily due to higher employee-related costs;

•$11 million increase in sales and commission expenses as a result of the mix of VOI Fee-for-Service sales; and

•$1 million increase in the cost of VOIs sold primarily due to higher gross VOI sales partially offset by the absence of the $33 million reduction in estimated recoveries related to the release of the COVID-19 related allowance in the prior year.

Travel and Membership

Net revenues increased $21 million and Adjusted EBITDA decreased $3 million during 2022 compared with 2021. The net revenue increase was unfavorably impacted by foreign currency of $6 million (0.8%) and the Adjusted EBITDA decrease was unfavorably impacted by foreign currency of $1 million (0.4%).

Increases in net revenues excluding the impact of foreign currency were primarily driven by:

•$20 million increase in transaction revenue driven by higher Travel Club transactions as a result of increased marketing and business development efforts, as well as the ongoing recovery from COVID-19. This increase was achieved despite some loss of supply for certain RCI affiliate locations where units had to be placed out of service due to damages sustained from Hurricane Ian in the fourth quarter of 2022; and

•$10 million increase in subscription revenue primarily due to the lessening impact of coupons issued during COVID-19. This increase was achieved despite a lower average exchange member count as a result of lower new owner enrollments due to COVID-19, industry consolidation, and lower renewals. We anticipate that the industry-wide decline in new owner enrollments as a result of COVID-19 will continue to have an impact on the level of exchange transactions into the first half of 2023.

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In addition to the revenue change explained above, Adjusted EBITDA excluding the impact of foreign currency was further impacted by:

•$18 million increase in cost of sales primarily due to increased Travel Club transaction revenue; and

•$11 million increase in marketing and other costs, primarily in support of the new travel club launches.

Corporate and other

Adjusted EBITDA decreased $12 million (19.4%) during 2022 compared with 2021 and was not materially impacted by foreign currency. The decrease in Adjusted EBITDA was primarily due to higher legal fees and employee-related costs.

For a comparative review of our consolidated results of operations and those of our reportable segments for the fiscal years ended December 31, 2021 and 2020, refer to Part II, Item 7 of our Annual Report on Form 10-K filed with the SEC on February 23, 2022.

DISCONTINUED OPERATIONS

During 2022 we recognized a $1 million gain on disposal of discontinued business, net of income taxes. During 2021 and 2020 we recognized losses on disposal of discontinued business, net of income taxes of $5 million and $2 million.

During both 2022 and 2020 we had $5 million of Net cash used in investing activities from discontinued operations on the Consolidated Statements of Cash Flows. We had no cash flow activity related to discontinued operations during 2021. See Note 6—Discontinued Operations to the Consolidated Financial Statements for additional information.

RESTRUCTURING PLANS

During 2022 and 2020, we incurred $14 million and $39 million of restructuring charges. During 2021, we reversed $1 million of the restructuring charges incurred in 2020. See Note 26—Restructuring to the Consolidated Financial Statements for additional details of our restructuring activities.

FINANCIAL CONDITION

Total assets increased $169 million from December 31, 2021 to December 31, 2022, due to:

•$181 million increase in Cash and cash equivalents primarily due to net cash provided by operating activities and net proceeds on debt and non-recourse debt; partially offset by share repurchases, dividends to shareholders, property and equipment additions, and payments associated with the acquisition of the Travel + Leisure brand;

•$29 million increase in Trade receivables, net driven by increased VOI trial package receivables and increased receivables associated with property management fees and reimbursable revenue; and a

•$61 million increase in Vacation ownership contract receivables, net, driven by VOI originations, partially offset by principal collections and allowance for loan losses.

These increases were partially offset by:

•$23 million decrease in Inventory driven by VOI sales and the net transfer of completed unregistered VOI inventory to property and equipment, partially offset by purchases of completed inventory and inventory recoveries;

•$25 million decrease in Prepaid expenses driven by the timing of prepaid maintenance fees;

•$31 million decrease in Property and equipment, net, driven by depreciation, partially offset by capital additions and the net transfer of completed VOI inventory to property and equipment; and a

•$15 million decrease in Other assets due to amortization of right-of-use operating lease assets and the sale of our equity investment in Vacasa LLC, partially offset by an increase in derivative assets.

Total liabilities increased $279 million from December 31, 2021 to December 31, 2022, due to:

•$39 million increase in Non-recourse vacation ownership debt primarily due to net borrowings; and a

•$290 million increase in Debt driven by an incremental term loan B borrowing.

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These increases were partially offset by a $63 million decrease in Accrued expenses and other liabilities driven by right-of-use operating lease liability payments, a decrease in income taxes payable, payment associated with the acquisition of the Travel + Leisure brand, payment of payroll taxes previously deferred under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, and a reduction in contingent consideration associated with a business acquisition, partially offset by an increase in inventory obligations and derivative liabilities.

Total deficit increased $110 million from December 31, 2021 to December 31, 2022, primarily due to $352 million of share repurchases; $136 million of dividends; and $31 million of unfavorable currency translation adjustments driven by fluctuations in exchange rates, primarily the British pound sterling, Australian dollar, Danish krone, and the Euro; partially offset by $357 million of Net income attributable to Travel + Leisure Co. shareholders and a $50 million increase in additional paid-in capital, primarily due to stock-based compensation.

LIQUIDITY AND CAPITAL RESOURCES

We believe that we have sufficient sources of liquidity to meet our expected ongoing short-term and long-term cash needs, including capital expenditures, operational and/or strategic opportunities, and expenditures for human capital, intellectual property, contractual obligations, off-balance sheet arrangements, and other such requirements. Our net cash from operations and cash and cash equivalents are key sources of liquidity along with our revolving credit facilities, bank conduit facilities, and continued access to debt markets. We believe these anticipated sources of liquidity are sufficient to meet our expected ongoing short-term and long-term cash needs, including the repayment of our $400 million notes due in March 2023. Our discussion below highlights these sources of liquidity and how they have been utilized to support our cash needs.

Cash and Cash Equivalents

As of December 31, 2022, we had $550 million of Cash and cash equivalents, which includes highly-liquid investments with an original maturity of three months or less.

$1.0 Billion Revolving Credit Facility

We generally utilize our revolving credit facility to finance our short-term to medium-term business operations, as needed. The facility expires in October 2026 and had $1.0 billion of available capacity as of December 31, 2022.

The revolving credit facility and term loan B are subject to covenants including the maintenance of specific financial ratios as defined in the credit agreement. The financial ratio covenants consist of a minimum interest coverage ratio and a maximum first lien leverage ratio. The interest coverage ratio is calculated by dividing consolidated EBITDA (as defined in the credit agreement) by consolidated interest expense (as defined in the credit agreement), both as measured on a trailing 12-month basis preceding the measurement date. The first lien leverage ratio is calculated by dividing consolidated first lien debt (as defined in the credit agreement) as of the measurement date by consolidated EBITDA (as defined in the credit agreement) as measured on a trailing 12-month basis preceding the measurement date.

During 2021, we entered into a second amendment to the credit agreement governing our revolving credit facility and term loan B (“Second Amendment”) which resulted in the termination of the relief period restrictions adopted in the July 15, 2020 first amendment as a result of the COVID-19 pandemic. The Second Amendment also included customary London Interbank Offered Rate (“LIBOR”) replacement language providing for alternative interest rate options upon the cessation of LIBOR publication. It is our intention to resolve our remaining LIBOR exposures in the first quarter of 2023 by early adopting the Term Secured Overnight Financing Rate (“SOFR”) on our revolving credit facility and Term Loan B facility.

As of December 31, 2022, our interest coverage ratio was 4.83 to 1.0 and our first lien leverage ratio was 3.54 to 1.0. These ratios do not include interest expense or indebtedness related to any qualified securitization financing (as defined in the credit agreement). As of December 31, 2022, we were in compliance with the financial covenants described above.

Secured Notes, and Term Loan B facilities

We generally utilize borrowing via secured note issuances to meet our long-term financing needs. During 2021, we issued $650 million of senior secured notes due 2029 with an interest rate of 4.50% and during 2022 we amended the credit agreement governing our revolving credit facility and term loan B (“Third Amendment”) which provided for an incremental term loan B borrowing of $300 million due 2029. We expect to use the net proceeds from the incremental term loan B borrowing toward the repayment of our $400 million notes due in March 2023. These transactions reinforce our expectation that we will maintain adequate liquidity for the next year and beyond. As of December 31, 2022, we had $3.66 billion of outstanding borrowings under our secured notes and Term Loan B facilities with maturities ranging from 2023 to 2030.

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Non-recourse Vacation Ownership Debt

Our Vacation Ownership business finances certain of its VOCRs through (i) asset-backed conduit facilities and (ii) term asset-backed securitizations, all of which are non-recourse to us with respect to principal and interest. For the securitizations, we pool qualifying VOCRs and sell them to bankruptcy-remote entities, all of which are consolidated into the accompanying Consolidated Balance Sheets. We plan to continue using these sources to finance certain VOCRs. On March 4, 2022 we renewed our USD bank conduit facility, extending its term through July 2024. This renewal included a reduction of the USD borrowing capacity from $800 million to $600 million. On December 21, 2022 we renewed our AUD/NZD bank conduit facility, extending its term through December 2024. The renewal included a reduction of the AUD borrowing capacity from A$250 million to A$200 million and a reduction of the NZD borrowing capacity from NZ$48 million to NZ$25 million. These capacity reductions were made in an effort to reduce fees associated with unused capacity. We believe that our USD bank conduit facility and our AUD/NZD bank conduit facility, amounting to a combined capacity of $752 million ($324 million available as of December 31, 2022), along with our ability to issue term asset-backed securities, provides sufficient liquidity to finance the sale of VOIs beyond the next year.

We closed on securitization financings of $800 million, $850 million, and $900 million during 2022, 2021, and 2020. These transactions positively impacted our liquidity and reinforce our expectation that we will maintain adequate liquidity for the next year and beyond.

Our liquidity position may be negatively affected by unfavorable conditions in the capital markets in which we operate or if our VOCR portfolios do not meet specified portfolio credit parameters. Our liquidity, as it relates to our VOCR securitization program, could be adversely affected if we were to fail to renew or replace our conduit facilities on their expiration dates, or if a particular receivables pool were to fail to meet certain ratios, which could occur in certain instances if the default rates or other credit metrics of the underlying VOCRs deteriorate. Our ability to sell securities backed by our VOCRs depends on the continued ability and willingness of capital market participants to invest in such securities.

Each of our non-recourse securitized term notes and the bank conduit facilities contain various triggers relating to the performance of the applicable loan pools. If the VOCR pool that collateralizes one of our securitization notes fails to perform within the parameters established by the contractual triggers (such as higher default or delinquency rates), there are provisions pursuant to which the cash flows for that pool will be maintained in the securitization as extra collateral for the note holders or applied to accelerate the repayment of outstanding principal to the note holders. As of December 31, 2022, all of our securitized loan pools were in compliance with applicable contractual triggers.

We may, from time to time, depending on market conditions and other factors, repurchase our outstanding indebtedness, whether or not such indebtedness trades above or below its face amount, for cash and/or in exchange for other securities or other consideration, in each case in open market purchases and/or privately negotiated transactions.

For additional details regarding our credit facilities, term loan B facilities, and non-recourse debt see Note 15—Debt to the Consolidated Financial Statements.

Material Cash Requirements

The following table summarizes material future contractual obligations of our continuing operations (in millions). We plan to fund these obligations along with our other cash requirements, with net cash from operations, cash and cash equivalents, and through the use of our revolving credit facilities, bank conduit facilities, and continued access to debt markets.

(a)Represents required principal payments on notes, term loans, and finance leases.

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(b)Represents required principal payments on debt that is securitized through bankruptcy-remote special purpose entities; the creditors of which have no recourse to us for principal and interest.

(c)Includes interest on debt and non-recourse debt; estimated using the stated interest rates.

(d)Includes $575 million for marketing related activities and $112 million for information technology activities.

(e)Represents obligations to repurchase completed vacation ownership properties from third-party developers (see Note 10—Inventory to the Consolidated Financial Statements for further detail) which was included within Accrued expenses and other liabilities on the Consolidated Balance Sheets.

(f)Excludes a $33 million liability for unrecognized tax benefits as it is not reasonably estimable to determine the periods in which such liability would be settled with the respective tax authorities.

In addition to the amounts shown in the table above and in connection with our separation from Cendant, we entered into certain guarantee commitments with Cendant (pursuant to our assumption of certain liabilities and our obligation to indemnify Cendant, Realogy, and Travelport for such liabilities) and guarantee commitments related to deferred compensation arrangements with Cendant and Realogy. We also entered into certain guarantee commitments and indemnifications related to the sale of our vacation rentals businesses. For information on matters related to our former parent and subsidiaries see Note 27—Transactions with Former Parent and Former Subsidiaries to the Consolidated Financial Statements.

In addition to the key contractual obligation and separation related commitments described above, we have the following other commercial commitments and off-balance sheet arrangements.

We enter into agreements that contain standard guarantees and indemnities whereby we indemnify another party for specified breaches of, or third-party claims relating to, an underlying agreement. Such underlying agreements are typically entered into by one of our subsidiaries. The various underlying agreements generally govern purchases, sales or outsourcing of products or services, leases of real estate, licensing of software and/or development of vacation ownership properties, customer data safeguards, access to credit facilities, derivatives, and issuances of debt securities. We also provide corporate guarantees for our operating business units relating to merchant credit-card processing for prepaid customer stays and other deposits. While a majority of these guarantees and indemnifications extend only for the duration of the underlying agreement, some survive the expiration of the agreement. We are not able to estimate the maximum potential amount of future payments to be made under these guarantees and indemnifications as the triggering events are not predictable. In certain cases we receive offsetting indemnifications from third-parties and/or maintain insurance coverage that may mitigate any potential payments.

Our vacation ownership business provides guarantees to certain owners’ associations for funds required to operate and maintain vacation ownership properties in excess of assessments collected from owners of the VOIs. We may be required to fund such a shortfall as a result of unsold company-owned VOIs or failure by owners to pay such assessments. In addition, from time to time, we may agree to reimburse certain owner associations up to 80% of their uncollected assessments. These guarantees extend for the duration of the underlying subsidy or similar agreement (which generally approximate one year and are renewable at our discretion on an annual basis). The maximum potential future payments that we could be required to make under these guarantees was $483 million as of December 31, 2022. We would only be required to pay this maximum amount if none of the assessed owners paid their assessments. Any assessments collected from the owners of the VOIs would reduce the maximum potential amount of future payments to be made by us. Additionally, should we be required to fund the deficit through the payment of any owners’ assessments under these guarantees, we would be permitted to use that property to engage in revenue-producing activities such as rentals. During 2022, 2021, and 2020, we made payments related to these guarantees of $12 million, $13 million, and $13 million. As of December 31, 2022 and 2021, we maintained a liability in connection with these guarantees of $20 million and $32 million included within Accrued expenses and other liabilities on the Consolidated Balance Sheets.

As part of the Fee-for-Service program, we may guarantee to reimburse the developer or to purchase inventory from the developer, for a percentage of the original sale price if certain future conditions exist. As of December 31, 2022, the maximum potential future payments that we may be required to make under these guarantees is $51 million. As of December 31, 2022 and 2021, we had no recognized liabilities in connection with these guarantees.

We generally utilize letters of credit to support the securitization of VOCR fundings, certain insurance policies, and development activities in our Vacation Ownership business. As of December 31, 2022, we had $34 million of irrevocable standby letters of credit outstanding, none of which were under our revolving credit facilities. As of December 31, 2021, we had $36 million of irrevocable standby letters of credit outstanding, of which $2 million were under our revolving credit facilities.

We also utilize surety bonds in our Vacation Ownership business for sales and development transactions in order to meet regulatory requirements of certain states. In the ordinary course of our business, we have assembled commitments from 12 surety providers in the amount of $2.3 billion, of which we had $455 million outstanding as of December 31, 2022. The

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availability, terms and conditions, and pricing of bonding capacity are dependent on, among other things, continued financial strength and stability of the insurance company affiliates providing the bonding capacity, general availability of such capacity, and our corporate credit rating. If the bonding capacity is unavailable or, alternatively, the terms and conditions and pricing of the bonding capacity are unacceptable to us, our Vacation Ownership business could be negatively impacted.

We have company sponsored severance plans in place for certain employees in the event of involuntary terminations, other than for cause. As of December 31, 2022, our maximum obligation under these severance plans was $173 million. Refer to the Proxy Statement for our 2023 Annual Meeting of Shareholders under the captions “Compensation of Directors,” “Executive Compensation” and “Committees of the Board” for additional details regarding executive compensation.

Our secured debt is rated Ba3 with a “stable outlook” by Moody’s Investors Service, Inc., BB- with a “stable outlook” by

Standard & Poor’s Rating Services, and BB+ with a “negative outlook” by Fitch Rating Agency. A security rating is not a recommendation to buy, sell or hold securities and is subject to revision or withdrawal by the assigning rating organization.

Reference in this report to any such credit rating is intended for the limited purpose of discussing or referring to aspects of our liquidity and of our costs of funds. Any reference to a credit rating is not intended to be any guarantee or assurance of, nor should there be any undue reliance upon, any credit rating or change in credit rating, nor is any such reference intended as any inference concerning future performance, future liquidity or any future credit rating. For information regarding the impact of changes to our credit rating and the credit rating of Wyndham Hotels, see Note 27—Transactions with Former Parent and Former Subsidiaries—Matters Related to the European Vacation Rentals Business to the Consolidated Financial Statements.

Currently, we have debt instruments in place that reference LIBOR-based rates. Although certain of these LIBOR based obligations provide for alternative methods of calculating the related interest rate payable (including transition to an alternative benchmark rate) if LIBOR is not reported, it may result in interest rates and/or payments that are higher than, lower than, or that do not otherwise correlate over time with the interest rates and/or payments that would have been made on our obligations if LIBOR was available in its current form.

We adopted appropriate LIBOR replacement rate transition language into the agreements for the renewal of our USD bank conduit facility in 2020 and the renewal of the credit agreement governing the revolving credit facility and term loan B in 2021. In the first quarter of 2023, we expect to exercise our option under our credit agreement to replace LIBOR with Term SOFR, subject to lender approval, as the benchmark rate governing our revolving credit facility and Term Loan B, which would eliminate our largest exposure to LIBOR based interest rates.

CASH FLOWS

The following table summarizes the changes in cash, cash equivalents, and restricted cash between 2022 and 2021 (in millions). For a comparative review of the fiscal years ended December 31, 2021 and 2020, refer to the Cash Flows section in Part II, Item 7 of our Annual Report on Form 10-K filed with the SEC on February 23, 2022.

Operating Activities

Net cash provided by operating activities was $442 million for the year ended December 31, 2022, compared to $568 million in the prior year. This $126 million decrease in 2022 was primarily driven by a $403 million increase in cash utilized for working capital, partially offset by a $234 million increase in non-cash add-back items, mainly a higher provision for loan losses, and a $49 million increase in net income from continuing operations.

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Investing Activities

Net cash used in investing activities from continuing operations decreased $48 million during the year ended December 31, 2022 This decrease was primarily driven by $35 million of cash payments for the acquisition of the Travel + Leisure brand in the prior year; and $8 million of proceeds from the sale of investments in the current year.

Net cash used in investing activities from discontinued operations was $5 million for the year ended December 31, 2022, primarily related to the settlement of post-closing adjustment claims associated with the sale of the European vacation rentals business.

Financing Activities

Net cash used in financing activities decreased $1.09 billion during the year ended December 31, 2022. This decrease was primarily due to $812 million of net repayments on debt and notes in the prior year compared to $284 million of net proceeds in the current year, $294 million of net repayments on non-recourse debt in the prior year compared to net proceeds of $47 million in the current year; partially offset by $326 million of higher share repurchases in the current year.

Capital Deployment

We focus on deploying capital for the highest possible returns. Ultimately, our business objective is to grow our business while optimizing cash flow and Adjusted EBITDA. We intend to continue to invest in select capital and technological improvements across our business. We may also seek to strategically grow the business through merger, acquisition, and other strategic transaction activities. As part of this strategy, we have made, and expect to continue to make, proposals and enter into non-binding letters of intent, allowing us to conduct due diligence on a confidential basis. A potential transaction contemplated by a letter of intent may never reach the point where we enter into a definitive agreement, nor can we predict the timing of such a potential transaction. Finally, we intend to continue to return value to shareholders through the repurchase of common stock and payment of dividends. All future declarations of quarterly cash dividends are subject to final approval by the Board of Directors.

During 2022, we spent $144 million on vacation ownership development projects (inventory). We believe that our Vacation Ownership business currently has adequate finished inventory to support vacation ownership sales for several years. The average inventory spend on vacation ownership development projects for the five-year period from 2023 through 2027 is expected to be between $130 million and $150 million annually. After factoring in the anticipated additional average annual spending, we expect to have adequate inventory to support vacation ownership sales through at least the next four to five years.

During 2022, we spent $52 million on capital expenditures, primarily for information technology and sales center improvement projects. During 2023, we anticipate spending between $60 million and $65 million on capital expenditures, primarily for continuation of information technology digital initiatives, travel club enablement, and sales center/resort improvements.

In connection with our focus on optimizing cash flow, we are continuing our asset-light efforts in vacation ownership by seeking opportunities with financial partners whereby they make strategic investments to develop assets on our behalf. We refer to this as Just-in-Time. The partner may invest in new ground-up development projects or purchase from us, for cash, existing in-process inventory which currently resides on our Consolidated Balance Sheets. The partner will complete the development of the project and we may purchase finished inventory at a future date as needed or as obligated under the agreement.

We expect that the majority of the expenditures that will be required to pursue our capital spending programs, strategic investments, and vacation ownership development projects will be financed with cash flow generated through operations and cash and cash equivalents. We expect that additional expenditures will be financed with general secured corporate borrowings, including through the use of available capacity under our revolving credit facility.

Share Repurchase Program

On August 20, 2007, our Board of Directors authorized a share repurchase program that enables us to purchase our common stock. As of December 31, 2022, the Board of Directors has increased the capacity of the program nine times, most recently in April 2022 by $500 million, bringing the total authorization under the current program to $6.5 billion. We had $477 million of remaining availability in our program as of December 31, 2022.

Under our current share repurchase program, we repurchased 8.2 million shares at an average price of $42.97 for a cost of $351 million during the year ended December 31, 2022. The amount and timing of specific repurchases are subject to market

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conditions, applicable legal requirements and other factors, including capital allocation priorities. Repurchases may be conducted in the open market or in privately negotiated transactions.

Dividends

We paid cash dividends of $0.40 per share for all four quarters of 2022. During 2021, we paid cash dividends of $0.30 per share for the first, second, and third quarters, and $0.35 per share for the fourth quarter. During 2020, we paid cash dividends of $0.50 per share for the first and second quarters, and $0.30 per share for the third and fourth quarters. The aggregate dividends paid to shareholders for 2022, 2021, and 2020, were $135 million, $109 million, and $138 million.

Our long-term plan is to grow our dividend at the rate of growth of our earnings at a minimum. The declaration and payment of future dividends to holders of our common stock are at the discretion of our Board of Directors and depend upon many factors, including our financial condition, earnings, capital requirements of our business, covenants associated with certain debt obligations, legal requirements, regulatory constraints, industry practice and other factors that our Board of Directors deems relevant. There is no assurance that a payment of a dividend or a dividend at current levels will occur in the future.

Foreign Earnings

We assert that substantially all undistributed foreign earnings will be reinvested indefinitely as of December 31, 2022. In the event we determine not to continue to assert that all or part of our undistributed foreign earnings are permanently reinvested, such a determination in the future could result in the accrual and payment of additional foreign withholding taxes, as well as U.S. taxes on currency transaction gains and losses, the determination of which is not practicable.

SEASONALITY

We experience seasonal fluctuations in our net revenues and net income from sales of VOIs and vacation exchange fees. Revenues from sales of VOIs are generally higher in the third quarter than in other quarters due to increased leisure travel. Revenues from vacation exchange fees are generally highest in the first quarter, which is generally when members of our vacation exchange business book their vacations for the year.

The seasonality of our business may cause fluctuations in our quarterly operating results. As we expand into new markets and geographical locations, we may experience increased or different seasonality dynamics that create fluctuations in operating results different from the fluctuations we have experienced in the past.

COMMITMENTS AND CONTINGENCIES

From time to time, we are involved in claims, legal and regulatory proceedings, and governmental inquiries related to our business, none of which, in the opinion of management, is expected to have a material effect on our results of operations or financial condition. See Note 19—Commitments and Contingencies to the Consolidated Financial Statements for a description of claims and legal actions arising in the ordinary course of our business along with our guarantees and indemnifications and Note 27—Transactions with Former Parent and Former Subsidiaries to the Consolidated Financial Statements for a description of our obligations regarding Cendant contingent litigation, matters related to Wyndham Hotels, matters related to the European vacation rentals business, and matters related to the North American vacation rentals business.

CRITICAL ACCOUNTING ESTIMATES

In presenting our financial statements in conformity with GAAP, we are required to make estimates and assumptions that affect the amounts reported therein. Several of the estimates and assumptions we are required to make relate to matters that are inherently uncertain as they pertain to future events. However, events that are outside of our control cannot be predicted and, as such, they cannot be contemplated in evaluating such estimates and assumptions. If there is a significant unfavorable change to current conditions, it could result in a material impact to our consolidated results of operations, financial position, and liquidity. We believe that the estimates and assumptions we used when preparing our financial statements were the most appropriate at that time. In addition to our significant accounting policies referenced in Note 2—Summary of Significant Accounting Policies to the Consolidated Financial Statements, presented below are the critical accounting estimates that we believe require subjective and complex judgments that could potentially affect reported results.

Vacation Ownership Revenue Recognition and Allowance for Loan Losses. Our sales of VOIs are either cash sales or developer-financed sales. For developer-financed sales, we project our losses for uncollectible accounts over the entire lives of our notes. This estimate of uncollectible consideration reduces the amount of revenue recognized at the time of sale and establishes an allowance for loan loss which reduces the receivable.

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Our estimates of uncollectible amounts are based on the results of our static pool analysis which tracks defaults for each year’s sales over the entire life of those contract receivables. We consider current defaults, past due aging, historical write-offs of contracts and consumer credit scores (FICO scores) in the assessment of a borrower’s credit strength, down payment amount and expected loan performance. We also consider whether the historical economic conditions are comparable to current economic conditions. If current or expected future conditions differ from the conditions in effect when the historical experience was generated, we adjust the allowance for loan losses to reflect the expected effects of the current environment on the collectability of our VOCRs. There were no changes to the assumptions used in this model in 2022.

In March 2020, as a result of the COVID-19 pandemic’s impact on our owners’ ability to repay their contract receivables, we added an additional model that increased the allowance for loan losses by $225 million, representing 6% of gross VOCRs as of March 31, 2020. This additional model was based upon historical data on the relationship between unemployment rates and net new defaults. The model provided for the full estimated impact of a recession (approximately 15-20 months from the peak of unemployment) based on our historical data from the recession in 2008. Based upon improved performance in our portfolio (lower net new defaults) and improved unemployment rates, we reversed $111 million of the initial $225 million provision recorded in March 2020. After considering write-offs and the allowance for remaining likely defaults associated with loans that were granted payment deferrals, we have not had a COVID-19 related allowance since December 31, 2021. The allowance for loan losses is our most significant and complex estimate. Over the past five years, the year-end allowance as a percentage of gross VOCRs has ranged from 18.1% to 19.5% with the exception of 2020 which was 21.8% as a result of the impact of COVID-19. See Note 9—Vacation Ownership Contract Receivables to the Consolidated Financial Statements for additional details of changes in the COVID-19 estimates and impacts to the financial statements.

Inventory. We use the relative sales value method of costing and relieving our VOI inventory. This method requires us to make estimates subject to significant uncertainty, including future sales prices and volumes as well as credit losses and related inventory recoveries. The impact of any changes in estimates under the relative sales value method is recorded in Cost of vacation ownership interests on the Consolidated Statements of Income/(Loss) in order to retrospectively adjust the margin previously recorded subject to those estimates. There were no changes in these assumptions during 2022.

Impairment of Long-Lived Assets. We perform an annual review of our goodwill and other indefinite-lived intangible assets, or more frequently if indicators of potential impairment exist. This analysis requires significant judgments, including anticipated market conditions, operating expense trends, estimation of future cash flows, which are dependent on internal forecasts, and estimation of long-term rate of growth. The estimates used to calculate the fair value of other indefinite-lived intangible assets change from year to year based on operating results and market conditions. There were no changes in the assumptions used in this analysis in 2022. Changes in these estimates and assumptions could materially affect the determination of fair value and the other indefinite-lived intangible assets impairment.

Business Combinations. A component of our growth strategy has been to acquire and integrate businesses that complement our existing operations. We account for business combinations in accordance with the guidance for business combinations and related literature. Accordingly, we allocate the purchase price of acquired companies to the tangible and intangible assets acquired and liabilities assumed based upon their estimated fair values at the date of purchase. The difference between the purchase price and the fair value of the net assets acquired is recorded as goodwill.

In determining the fair values of assets acquired and liabilities assumed in a business combination, we use various recognized valuation methods including present value modeling and referenced market values (where available). Further, we make assumptions within certain valuation techniques including discount rates and timing of future cash flows. Valuations are performed by management or independent valuation specialists under management’s supervision, where appropriate. We believe that the estimated fair values assigned to the assets acquired and liabilities assumed are based on reasonable assumptions that marketplace participants would use. However, such assumptions are inherently uncertain and actual results could differ from those estimates.

Guarantees. In the ordinary course of business, we enter into agreements that contain standard guarantees and indemnities whereby we indemnify another party for specified breaches of, or third-party claims relating to, an underlying agreement. Such underlying agreements are typically entered into by one of our subsidiaries. The various underlying agreements generally govern purchases, sales or outsourcing of products or services, leases of real estate, licensing of software and/or development of vacation ownership properties, access to credit facilities, derivatives and issuances of debt securities. Also in the ordinary course of business, we provide corporate guarantees for our operating business units relating to merchant credit-card processing for prepaid customer stays and other deposits. While a majority of these guarantees and indemnifications extend only for the duration of the underlying agreement, some survive the expiration of the agreement. We are not able to estimate the maximum

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potential amount of future payments to be made under these guarantees and indemnifications as the triggering events are not predictable. In certain cases, we maintain insurance coverage that may mitigate any potential payments.

Income Taxes. We regularly review our deferred tax assets to assess their potential realization and establish a valuation allowance for portions of such assets that we believe will not be ultimately realized. In performing this review, we make estimates and assumptions regarding projected future taxable income, the expected timing of the reversals of existing temporary differences and the implementation of tax planning strategies. 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 impact our results of operations.

For tax positions we have taken or expect to take in our tax return, we apply a more likely than not threshold, under which we must conclude a tax position is more likely than not to be sustained, assuming that the position will be examined by the appropriate taxing authority that has full knowledge of all relevant information, in order to recognize or continue to recognize the benefit. In determining our provision for income taxes, we use judgment, reflecting our estimates and assumptions, in applying the more likely than not threshold.

ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

BUSINESS AND OVERVIEW

We are a global provider of hospitality services and travel products and operate our business in the following two segments:

•Vacation Ownership — develops, markets and sells vacation ownership interests (“VOIs”) to individual consumers, provides consumer financing in connection with the sale of VOIs, and provides property management services at resorts.

•Travel and Membership — operates a variety of travel businesses, including three vacation exchange brands, a home exchange network, travel technology platforms, travel memberships, and direct-to-consumer rentals.

Travel + Leisure Brand Acquisition

On January 5, 2021, Wyndham Destinations, Inc. acquired the Travel + Leisure brand and related assets from Meredith Corporation (“Meredith”) for $100 million, of which $55 million was paid during 2021. The remaining payments are to be completed by June 2024. This acquisition included Travel + Leisure branded travel clubs and members. We acquired the Travel + Leisure brand to accelerate our strategic plan to broaden our reach with the launch of new travel services, expand our membership travel business, and amplify the global visibility of our leisure travel products. Meredith will continue to operate and monetize Travel + Leisure branded multi-platform media assets across multiple channels under a 30-year royalty-free, renewable licensing relationship. In connection with this acquisition, on February 17, 2021, Wyndham Destinations, Inc. was renamed Travel + Leisure Co. and continues to trade on the New York Stock Exchange under the new ticker symbol TNL.

In connection with the Travel + Leisure brand acquisition we updated the names and composition of our reportable segments to better align with how they are managed. We created the Travel + Leisure Group which falls under the Travel and Membership segment along with the Panorama business line. With the formation of the Travel + Leisure Group, we decided that the operations of our Extra Holidays business, which focuses on direct-to-consumer bookings, better aligns with the operations of this new business line and therefore transitioned the management of our Extra Holidays business to the Travel and Membership segment. As such, we reclassified the results of our Extra Holidays business, which were previously reported within the Vacation Ownership segment, into the Travel and Membership segment.

Impact of COVID-19 on Our Business

The results of operations for the years ended December 31, 2021 and 2020 include impacts related to the novel coronavirus global pandemic (“COVID-19”), which have been significantly negative for the travel industry, our company, our customers, and our employees.

Our response to COVID-19 initially focused on the health and safety of our owners, members, guests, and employees when we closed the majority of our resorts and sales centers in early 2020. As a result, we significantly reduced our workforce and furloughed thousands of employees at that time. As of December 31, 2021, we had reopened all of the resorts and sales offices in North America that we expect to reopen. The remaining closed resorts and sales offices that we intend to reopen are located in the South Pacific and are expected to reopen in 2022, contingent upon the lifting of government imposed travel restrictions. As a result of reopening substantially all of our resorts, the majority of furloughed employees have returned to work.

Given the significant impacts of COVID-19 on our business, our revenues have been negatively impacted. While revenues are continuing to recover, not all product and service lines have yet reached pre-pandemic levels, and we believe that COVID-19 will continue to have an adverse effect on our financial condition and results of operations in the near term. Despite some volatility with recent spikes in COVID-19 case-counts as a result of variants, in general, we are seeing a broad increase in consumer confidence as well as a reduction in travel restrictions. These factors combined with progress in the roll-out of vaccinations have continued to help travel sentiment improve. Assuming travel sentiment continues to improve, we expect increases in both VOI sales and new owner mix in 2022. We also expect an increase in the percentage of financed VOI sales, which would impact our allowance for loan losses.

During the year ended December 31, 2021, we reversed $61 million of COVID-19 charges, compared to $385 million of charges incurred in 2020. The $61 million of net reversals during 2021 included the release of $91 million of the COVID-19 related allowance for loan losses. See Note 26—COVID-19 Related Items to the Consolidated Financial Statements for additional details on the impact COVID-19 had on our business.

Included in the $385 million of COVID-19 related charges for the year ended December 31, 2020, was a $225 million COVID-19 related loan loss provision recorded during the first quarter as a result of our evaluation of the impact of COVID-19

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on our owners’ ability to repay their vacation ownership contract receivables (“VOCRs”). As we began to see an improvement in net new defaults and lower than expected unemployment rates, we reduced this provision by $20 million in the fourth quarter of 2020.

Since the time the COVID-19 related allowance was established in March 2020, we have reversed $111 million of the initial $225 million provision. After considering write-offs and the allowance for remaining likely defaults associated with loans that were granted payment deferrals, we have no COVID-19 related allowances as of December 31, 2021.

As a precautionary measure to enhance liquidity during the pandemic, in the first quarter of 2020, we drew down our $1.0 billion revolving credit facility and suspended share repurchase activity. In the third quarter of 2020, we amended the credit agreement governing our revolving credit facility and term loan B (“First Amendment”), which provided financial covenant flexibility during the relief period that commenced on July 15, 2020 and was scheduled to end on April 1, 2022 (the “Relief Period”). During the Relief Period we were prohibited from using cash for share repurchases but maintained our ability to pay dividends and make investments in our business. During 2021 we repaid the $1.0 billion revolving credit facility, the $250 million 5.625% secured notes due March 2021, and the $650 million 4.25% secured notes due March 2022. On October 22, 2021, we renewed the credit agreement governing our revolving credit facility and term loan B (“Second Amendment”), which terminated the Relief Period, established new thresholds for our financial covenant ratios and eliminated the restrictions regarding share repurchases, dividends, and acquisitions established by the First Amendment. In connection with entering the Second Amendment, we resumed share repurchases during the fourth quarter of 2021.

As part of our reopening strategy, we focused on higher margin owner business by leveraging our owner upgrade pipeline. Prior to the pandemic, just under 40% of our sales transactions were to lower margin new owners as compared to 28% during 2021.

We also raised our credit standards and directed our marketing efforts towards higher Fair Isaac Corporation (“FICO”) scores, which we expect will continue to strengthen our receivables portfolio going forward. Additionally, we closed certain unprofitable marketing and sales locations and shifted marketing channels and resources to our most productive channels. All of these changes were designed to result in higher volume per guest (“VPG”), which is a measure of sales efficiency and is strongly correlated to profitability.

For certain of the events, uncertainties, trends, and risks associated with the impact of the COVID-19 pandemic on our future results and financial condition, see “Risks Related to the COVID-19 Pandemic” included in Part I, Item 1A of this Annual Report filed on Form 10-K.

Alliance Reservations Network Acquisition

On August 7, 2019, we acquired Alliance Reservations Network (“ARN”) for $102 million ($97 million net of cash acquired). ARN provides private-label travel booking technology solutions. This acquisition was undertaken for the purpose of accelerating growth at Travel and Membership by increasing the offerings available to its members and affiliates. See Note 5—Acquisitions to the Consolidated Financial Statements for additional details. ARN is reported within the Travel and Membership segment.

North American Vacation Rentals Business Sale

During 2019 we closed on the sale of our North American vacation rentals business for $162 million. This business did not meet the criteria to be classified as a discontinued operation; therefore, the results of operations are reflected within continuing operations on the Consolidated Statements of Income/(Loss) through the date of sale.

SEGMENT OVERVIEW

Vacation Ownership

We develop, market, and sell VOIs to individual consumers, provide consumer financing in connection with the sale of VOIs, and provide property management services at resorts. Our sales of VOIs are either cash sales or developer-financed sales. Developer-financed sales are typically collateralized by the underlying VOI. Revenue is recognized on VOI sales upon transfer of control, which is defined as the point in time when a binding sales contract has been executed, the financing contract has been executed for the remaining transaction price, the statutory rescission period has expired, and the transaction price has been deemed to be collectible.

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For developer-financed sales, we reduce the VOI sales transaction price by an estimate of uncollectible consideration at the time of the sale. Our estimates of uncollectible amounts are based largely on the results of our static pool analysis which relies on historical payment data by customer class.

In connection with entering into a VOI sale, we may provide our customers with certain non-cash incentives, such as credits for future stays at our resorts. For those VOI sales, we bifurcate the sale and allocate the sales price between the VOI sale and the non-cash incentive. Non-cash incentives generally have expiration periods of 18 months or less and are recognized at a point in time upon transfer of control.

We provide day-to-day property management services including oversight of housekeeping services, maintenance, and certain accounting and administrative services for property owners’ associations and clubs. These services may also include reservation and resort renovation activities. Such agreements are generally for terms of one year or less, and are renewed automatically on an annual basis. Our management agreements contain cancellation clauses, which allow for either party to cancel the agreement, by either a majority board vote or a majority vote of non-developer interests. We receive fees for such property management services which are collected monthly in advance and are based upon total costs to operate such resorts (or as services are provided in the case of resort renovation activities). Fees for property management services typically approximate 10% of budgeted operating expenses. We are entitled to consideration for reimbursement of costs incurred on behalf of the property owners’ association in providing the management services (“reimbursable revenue”). These reimbursable costs principally relate to the payroll costs for management of the associations, club and resort properties where we are the employer and are reflected as a component of Operating expenses on the Consolidated Statements of Income/(Loss). We reduce our management fees for amounts paid to the property owners’ association that reflect maintenance fees for VOIs for which we retain ownership, as we have concluded that such payments are consideration payable to a customer.

Property management fee revenues are recognized when the services are performed and are recorded as a component of Service and membership fees on the Consolidated Statements of Income/(Loss). Property management revenues, which are comprised of management fee revenue and reimbursable revenue, for the years ended December 31, were (in millions) (a):

(a)Reflects the impact of reclassifying the Extra Holidays business line from the Vacation Ownership segment to Travel and Membership.

One of the associations that we manage paid our Travel and Membership segment $30 million for exchange services during 2021, $27 million during 2020, and $29 million during 2019.

Within our Vacation Ownership segment, we measure operating performance using the following key operating statistics: (i) gross VOI sales including Fee-for-Service sales before the effect of loan loss provisions, (ii) tours, which represents the number of tours taken by guests in our efforts to sell VOIs, and (iii) VPG, which represents revenue per guest and is calculated by dividing the gross VOI sales (excluding tele-sales upgrades, which are non-tour upgrade sales) by the number of tours.

Travel and Membership

Travel and Membership derives a majority of revenues from membership dues and fees for facilitating members’ trading of their intervals. Revenues from membership dues represent the fees paid by members or affiliated clubs on their behalf. We recognize revenues from membership dues paid by the member on a straight-line basis over the membership period as the performance obligations are fulfilled through delivery of publications, if applicable, and by providing access to travel-related products and services. Estimated net contract consideration payable by affiliated clubs for memberships is recognized as revenue over the term of the contract with the affiliated club in proportion to the estimated average monthly member count. Such estimates are adjusted periodically for changes in the actual and forecasted member activity. For additional fees, members have the right to exchange their intervals for intervals at other properties affiliated with our vacation exchange networks and, for certain members, for other leisure-related services and products. We also derive revenue from facilitating bookings of travel accommodations for both members and non-members. Revenue is recognized when these transactions have been confirmed, net of expected cancellations; except in certain transactions where we have a performance obligation that is not satisfied until the time of stay.

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As a provider of vacation exchange services, we enter into affiliation agreements with developers of vacation ownership properties to allow owners of VOIs to trade their intervals for intervals at other properties affiliated with our vacation exchange network and, for some members, for other leisure-related services and products.

Our vacation exchange business also derives revenues from programs with affiliated resorts, club servicing, and loyalty programs; and additional exchange-related products that provide members with the ability to protect trading power or points, extend the life of deposits, and combine two or more deposits for the opportunity to exchange into intervals with higher trading power. Other vacation exchange-related product fees are deferred and recognized as revenue upon the occurrence of a future exchange, event, or other related transaction.

We earn revenue from our RCI Elite Rewards co–branded credit card program, which is primarily generated by cardholder spending and the enrollment of new cardholders. The advance payments received under the program are recognized as a contract liability until our performance obligations have been satisfied. The primary performance obligation for the program relates to brand performance services. Total contract consideration is estimated and recognized on a straight-line basis over the contract term.

Prior to the sale of our vacation rental businesses, our vacation rental brands derived revenue from fees associated with the rental of vacation properties we managed and marketed on behalf of independent owners. We remitted the rental fee received from the renter to the independent owner, net of our agreed-upon fee. The related revenue from such fees, net of expected refunds, was recognized over the renter’s stay. Our vacation rental brands also derived revenues from additional services delivered to independent owners, vacation rental guests, and property owners’ associations which were generally recognized when the service was delivered.

Within our Travel and Membership segment, we measure operating performance using the following key operating statistics: (i) average number of exchange members, which represents paid members in our vacation exchange programs who are considered to be in good standings, (ii) transactions, which represents the number of vacation bookings recognized as revenue during the period, net of cancellations, provided in two categories; Exchange, which is primarily RCI, and non-Exchange, and (iii) revenue per transaction, which represents transactional revenue divided by transactions, provided in two categories; Exchange, which is primarily RCI, and non-Exchange.

Other Items

We record property management services revenues and RCI Elite Rewards revenues for our Vacation Ownership and Travel and Membership segments in accordance with the guidance for reporting revenues gross as a principal versus net as an agent, which requires that these revenues be recorded on a gross basis.

Discussed below are our consolidated results of operations and the results of operations for each of our reportable segments. These reportable segments represent our operating segments for which discrete financial information is available and which are utilized on a regular basis by our chief operating decision maker to assess performance and to allocate resources. In identifying the reportable segments, we also consider the nature of services provided by our operating segments. Management uses net revenues and Adjusted EBITDA to assess the performance of the reportable segments. We define Adjusted EBITDA as Net income/(loss) from continuing operations before Depreciation and amortization, Interest expense (excluding Consumer financing interest), early extinguishment of debt, Interest income (excluding Consumer financing revenues) and income taxes. Adjusted EBITDA also excludes stock-based compensation costs, separation and restructuring costs, legacy items, transaction costs for acquisitions and divestitures, impairments, gains and losses on sale/disposition of business, and items that meet the conditions of unusual and/or infrequent. Legacy items include the resolution of and adjustments to certain contingent assets and liabilities related to acquisitions of continuing businesses and dispositions, including the separation of Wyndham Hotels, Inc. (“Wyndham Hotels”) and Cendant, and the sale of the vacation rentals businesses. We believe that Adjusted EBITDA is a useful measure of performance for our segments which, when considered with generally accepted accounting principles in the U.S. (“GAAP”) measures, gives a more complete understanding of our operating performance. Our presentation of Adjusted EBITDA may not be comparable to similarly-titled measures used by other companies.

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OPERATING STATISTICS

The table below presents our operating statistics for the years ended December 31, 2021 and 2020. These operating statistics are the drivers of our revenues and therefore provide an enhanced understanding of our businesses. Refer to the Results of Operations section for a discussion on how these operating statistics affected our business for the periods presented.

(a)Represents total sales of VOIs, including sales under the Fee-for-Service program before the effect of loan loss provisions. We believe that Gross VOI sales provide an enhanced understanding of the performance of our vacation ownership business because it directly measures the sales volume of this business during a given reporting period.

(b)Represents the number of tours taken by guests in our efforts to sell VOIs.

(c)VPG is calculated by dividing Gross VOI sales (excluding tele-sales upgrades, which are non-tour upgrade sales) by the number of tours. We believe that VPG provides an enhanced understanding of the performance of our vacation ownership business because it directly measures the efficiency of this business’ tour selling efforts during a given reporting period.

(d)Includes the impact from acquisitions from the acquisition dates forward

(e)Represents the number of vacation bookings recognized as revenue during the period, net of cancellations.

(f)Represents transactional revenue divided by transactions.

(g)Represents paid members in our vacation exchange programs who are considered to be in good standing.

(h)Percentage of change may not calculate due to rounding.

(i)The following table provides a reconciliation of Vacation ownership interest sales, net to Gross VOI sales for the years ended December 31, (in millions):

(1)     Represents total sales of VOIs through our Fee-for-Service programs where inventory is sold through our sales and marketing channels for a commission. Fee-for-Service commission revenues were $101 million and $22 million for the years ended December 31, 2021 and 2020. These commissions are reported within Service and membership fees on the Consolidated Statements of Income/(Loss).

The closures of our resorts and suspension of our sales and marketing operations in response to COVID-19 in 2020 resulted in lower tours which negatively impacted gross VOI sales at our Vacation Ownership segment. In our Travel and Membership segment, affiliate resort closures and regional travel restrictions contributed to decreased bookings and increased cancellations, which resulted in lower transactions and revenue per transaction during 2020. In 2021, we experienced significant improvements in VOI sales, tours, VPG, the number of Travel and Membership transactions, and revenue per transaction; however, not all product and service lines have yet returned to pre-pandemic levels. We expect the impact of COVID-19 on our operating statistics to continue into 2022; however we do not expect to incur the same level of COVID-19 impact on our revenues or the level of COVID-19 expenses that we did in 2020.

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RESULTS OF OPERATIONS

Our consolidated results for the years ended December 31, 2021, versus December 31, 2020, are as follows (in millions):

During 2020 we evaluated the potential impact of COVID-19 on our owners’ ability to repay their contract receivable and as a result of current and anticipated unemployment rates at that time, we recorded a $205 million COVID-19 related provision, which negatively impacted revenues, and a corresponding $48 million benefit to Cost of vacation ownership interests, representing estimated recoveries related to this provision. These adjustments negatively impacted prior year Adjusted EBITDA by $157 million. During 2021 we analyzed the adequacy of the COVID-19 related allowance consistent with past methodology, resulting in a $91 million release, which positively impacted revenues, and a corresponding $33 million increase in Cost of vacation ownership interests, representing the associated reduction in estimated recoveries. The net positive impact of the COVID-19 related allowance release on Adjusted EBITDA was $58 million for the year ended December 31, 2021.

Net revenues increased $974 million during 2021 compared with 2020. This increase was favorably impacted by foreign currency of $11 million (0.5%). Excluding the impacts of foreign currency and the COVID-19 related provision adjustments discussed above, the increase in net revenues was primarily the result of:

•$475 million of increased revenues at our Vacation Ownership segment primarily due to an increase in gross VOI sales, higher property management and commission revenues as a result of the ongoing recovery of our operations from the impact of COVID-19; partially offset by a decrease in consumer financing revenues due to a lower average portfolio balance; and

•$196 million increased revenues at our Travel and Membership segment driven by higher transaction revenues as we continue to recover from the impacts of COVID-19, partially offset by a decrease in subscription revenues driven by lower new owner sales in the timeshare industry.

Expenses increased $251 million during 2021 compared with 2020. This increase was unfavorably impacted by foreign currency of $8 million (0.4%). Excluding the impacts of foreign currency, and the Cost of vacation ownership interest related to the COVID-19 provision adjustments discussed above the increase in expenses was the result of:

•$97 million increase in cost of sales and other operating costs in support of higher Travel and Membership revenues;

•$73 million increase in the cost of VOIs sold primarily due to higher gross VOI sales;

•$66 million increase in property management expenses due to higher management fees and reimbursable expenses;

•$52 million increase in commission expense as a result of higher Fee-for-Service VOI sales;

•$51 million increase in sales and commission expenses at the Vacation Ownership segment primarily due to higher gross VOI sales;

•$36 million increase in general and administrative expenses primarily due to higher employee-related costs;

•$34 million increase in marketing costs in support of increased revenue; and

•$16 million increase in maintenance fees on unsold inventory.

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These increases were partially offset by:

•$230 million decrease in COVID-19 related costs including employee compensation related costs ($84 million); impairments ($62 million); the write-down of exchange inventory ($48 million) and restructuring charges ($37 million); and

•$20 million decrease in consumer financing interest expense primarily due to a lower average non-recourse debt balance.

Other income, net of other expense decreased $8 million during 2021 compared with 2020, primarily due to lower business interruption recoveries in 2021 and value added tax provision releases; partially offset by an unrealized gain from our equity stake in Vacasa, LLC (“Vacasa”) in 2021 and an unfavorable tax settlement in 2020.

Interest expense increased $6 million during 2021 compared with 2020 primarily due to a higher average outstanding balance in 2021.

Our effective tax rates were 27.0% and 8.3% for the years ended December 31, 2021 and 2020. Our effective tax rate in 2020 was significantly impacted by COVID-19, leading to a mix of earnings in higher tax rate jurisdictions and losses in lower tax rate jurisdictions that reduced our overall effective tax rate.

Loss on disposal of discontinued business, net of income taxes was $5 million during 2021 resulting from entering into a settlement agreement for post-closing adjustment claims related to the sale of the European vacation rentals business, contingent upon regulatory approval; and $2 million during 2020 resulting from a tax audit related to the European vacation rentals business. These losses were net of Wyndham Hotels’ one-third share.

As a result of these items, Net income attributable to Travel + Leisure Co. shareholders was $308 million in 2021 as compared with a Net loss attributable to Travel + Leisure Co. shareholders of $255 million in 2020.

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Following is a discussion of the 2021 results of each of our segments compared to 2020 (in millions):

(a)Includes the elimination of transactions between segments.

(b)Reflects severance and other employee costs associated with layoffs due to the COVID-19 workforce reduction offset in part by employee retention credits received in connection with the U.S. Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, American Rescue Plan Act of 2021, and similar international programs for wages paid to certain employees despite having operations suspended. This amount does not include costs associated with idle pay.

(c)Represents the unrealized gain associated with Vacasa equity acquired as part of the consideration for the sale of North America vacation rentals. The total amount of unrealized gain on this investment was $9 million for the year ended December 31, 2021, of which $6 million is included in Asset impairments/(recovery) on the Consolidated Statements of Income/(Loss) to offset the 2020 impairment recognized on this investment.

(d)Includes $5 million of bad debt expense related to a note receivable for the year ended December 31, 2020, included in Operating expenses on the Consolidated Statements of Income/(Loss).

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Vacation Ownership

Net revenues increased $778 million and Adjusted EBITDA increased $437 million during 2021 compared with 2020. The net revenue increase was favorably impacted by foreign currency of $7 million (0.4%) and the Adjusted EBITDA increase was favorably impacted by foreign currency of $2 million (1.7%).

The net revenue increase excluding the impact of foreign currency was primarily driven by:

•$382 million increase in gross VOI sales, net of Fee-for-Service sales, due to the ongoing recovery of our operations from the impact of COVID-19;

•$286 million decrease in our provision for loan losses primarily due to the COVID-19 related allowance adjustments ($205 million provision recorded during 2020 and $91 million release during 2021);

•$85 million increase in property management revenues primarily due to higher management fees and reimbursable revenues; and

•$78 million increase in commission revenues as a result of higher Fee-for-Service VOI sales.

These increases were partially offset by a $63 million decrease in consumer financing revenues primarily due to a lower average portfolio balance.

In addition to the drivers above, Adjusted EBITDA excluding the impact of foreign currency was further impacted by:

•$154 million increase in the cost of VOIs sold primarily due to higher gross VOI sales, the absence of a $48 million benefit recorded in 2020 representing estimated recoveries related to the COVID-19 related provision, and a $33 million reduction in estimated recoveries related to the release of our COVID-19 related allowance during 2021;

•$66 million increase in property management expenses primarily due to higher management fees and reimbursable expenses;

•$52 million increase in commission expense as a result of higher Fee-for-Service VOI sales;

•$51 million increase in sales and commission expenses due to higher gross VOI sales;

•$22 million increase in marketing costs in support of increased revenue;

•$17 million increase in general and administrative expenses primarily due to higher employee-related costs; and

•$16 million increase in maintenance fees on unsold inventory.

These increased expenses were partially offset by:

•$30 million decrease in COVID-19 related costs associated with workforce reductions; and

•$20 million decrease in consumer financing interest expense primarily due to a lower average non-recourse debt balance.

Travel and Membership

Net revenues increased $200 million and Adjusted EBITDA increased $91 million during 2021 compared with 2020. The net revenue increase was favorably impacted by foreign currency of $4 million (0.7%) and the Adjusted EBITDA increase was favorably impacted by foreign currency of $1 million (0.5%).

Increases in net revenues excluding the impact of foreign currency were primarily driven by:

•$202 million increase in transaction revenue driven by a 61% increase in transactions and a 7% increase in revenue per transaction; partially offset by

•$6 million decrease in subscription revenue due to a 1% decrease in average number of exchange members driven by lower new owner sales in the timeshare industry.

In addition to the revenue changes explained above, Adjusted EBITDA excluding the impact of foreign currency was further impacted by the following operational costs in support of increased revenues:

•$86 million increase in cost of sales;

•$12 million increase in marketing expense; and

•$11 million increase in operational expenses.

These increased expenses were partially offset by a $3 million decrease in general and administrative expenses resulting from staff reductions and cost savings initiatives implemented after the first quarter of 2020.

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Corporate and other

Corporate and other Adjusted EBITDA decreased $9 million (17.0%) during 2021 compared with 2020 and was not materially impacted by foreign currency. The decrease in Adjusted EBITDA was primarily due to higher employee-related costs.

For a comparative review of our consolidated results of operations and the results of operations of our reportable segments for the fiscal years ended December 31, 2020 and 2019, refer to Part II, Item 7 of our Annual Report on Form 10-K filed with the SEC on February 24, 2021.

DISCONTINUED OPERATIONS

We recognized a loss on disposal of discontinued business, net of income taxes of $5 million during 2021 resulting from entering into a settlement agreement regarding post-closing adjustment claims related to the sale of the European vacation rentals business, contingent upon regulatory approval. See Note 29—Transactions with Former Parent and Former Subsidiaries to the Consolidated Financial Statements for additional information. During 2020, we recognized a $2 million loss on disposal of discontinued business, net of income taxes resulting from a tax audit related to the European vacation rentals business. During 2019, we recognized an additional $18 million gain on the sale of our European vacation rentals business, related to $12 million of tax benefits associated with additional foreign tax credit utilization and lower than anticipated state income taxes, as well as $6 million in returned escrow deposits associated with expired guarantees.

SEPARATION AND TRANSACTION COSTS

During 2019, we incurred $45 million of expenses in connection with the spin-off of our hotel business completed on May 31, 2018, which are reflected within continuing operations. These separation costs were related to stock compensation, severance and other employee costs, as well as impairment charges as a result of abandoning portions of our administrative offices in New Jersey. This decision was part of our continued focus on rationalizing existing facilities in order to reduce our corporate footprint. These expenses also include additional impairment charges related to the early termination of an operating lease in Chicago, Illinois, partially offset by an indemnification receivable from Wyndham Hotels. Refer to Note 13—Leases to the Consolidated Financial Statements for additional detail regarding these impairments.

RESTRUCTURING PLANS

During 2020, we recorded $37 million of charges related to restructuring initiatives, $36 million of which were COVID-19 related. Due to the impact of COVID-19, we decided in the second quarter of 2020 to abandon the remaining portion of our administrative offices in New Jersey. We were also notified in the second quarter of 2020 that Wyndham Hotels exercised its early termination rights under the sublease agreement. As a result, we recorded $22 million of restructuring charges associated with non-lease components of the office space and $24 million of impairment charges associated with the write-off of right-of-use assets and furniture, fixtures and equipment at our Travel and Membership segment. We also recognized $12 million of lease-related charges due to the renegotiation of an agreement and $2 million of facility-related restructuring charges associated with closed sales centers at our Vacation Ownership segment. We additionally recognized $1 million in employee-related expenses associated with the consolidation of a shared service center within our Travel and Membership segment. We reduced the 2020 restructuring liability by $5 million and $12 million of cash payments during 2021 and 2020. During 2021 we also reversed $1 million of expense related to the reimbursement of prepaid licensing fees that were previously written-off, and increased the liability by $3 million of cash reimbursements at our Vacation Ownership segment. The remaining 2020 restructuring liability of $22 million is expected to be paid by the end of 2029.

During 2019, we recorded $5 million of charges related to restructuring initiatives, most of which are personnel-related resulting from a reduction of approximately 100 employees. This action was primarily focused on enhancing organizational efficiency and rationalizing operations. The charges consisted of (i) $2 million at our Vacation Ownership segment, (ii) $2 million at our Travel and Membership segment, and (iii) $1 million at our corporate operations. During 2020, we incurred an additional $1 million of restructuring expenses at both our Travel and Membership segment and our corporate operations. We reduced the restructuring liability by less than $1 million, $5 million, and $1 million of cash payments during 2021, 2020, and 2019. As of December 31, 2021 the 2019 restructuring liability has been paid off.

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FINANCIAL CONDITION

Total assets decreased $1.03 billion from December 31, 2020 to December 31, 2021, due to:

•$827 million decrease in Cash and cash equivalents primarily due to net debt repayments, including the revolving credit facility, notes, and non-recourse debt; dividend payments; property and equipment additions; payments associated with the acquisition of the Travel + Leisure brand; and treasury share repurchases; partially offset by net cash provided by operating activities.

•$173 million decrease in Vacation ownership contract receivables, net, driven by principal collections and allowance for loan losses, partially offset by net VOI originations;

•$131 million decrease in Inventory driven by VOI sales and lower estimated VOI recoveries, partially offset by purchases; and

•$48 million decrease in Other assets primarily due to the receipt of employee retention credits earned in connection with the CARES Act in 2020, as well as decreases in tax receivables, right-of-use assets, and deferred costs, partially offset by an increase in marketable securities.

These decreases were partially offset by an $88 million increase in Other intangibles, net primarily related to the acquisition of the Travel + Leisure brand from Meredith; a $23 million increase in Prepaid expenses; and a $23 million increase in Property and equipment, net.

Total liabilities decreased $1.2 billion from December 31, 2020 to December 31, 2021, due to:

•$65 million decrease in Deferred income due to increased usage of deferred VOI trial packages, VOI incentives, and subscription revenue as a result of owners and members returning to vacation as COVID-19 travel restrictions lifted;

•$300 million decrease in Non-recourse vacation ownership debt primarily due to net repayments;

•$805 million decrease in Debt due to net repayments of the revolving credit facility, early payoff of the $650 million notes due March 2022, and the repayment of the $250 million notes due March 2021; partially offset by the issuance of $650 million notes due December 2029; and

•$39 million decrease in Deferred income taxes due to installment sales partially offset by the allowance for bad debt.

Total deficit decreased $174 million from December 31, 2020 to December 31, 2021, due to $308 million of Net income attributable to Travel + Leisure Co. shareholders; and $32 million due to changes in stock based compensation; partially offset by $111 million of dividends; $32 million of unfavorable currency translation adjustments driven by fluctuations in the exchange rates, primarily of the Australian dollar, the Danish krone, and the Euro; and $26 million of share repurchases.

LIQUIDITY AND CAPITAL RESOURCES

We believe that we have sufficient liquidity to meet our ongoing cash needs for the next year and beyond, including capital expenditures, operational and/or strategic opportunities, and expenditures for human capital, intellectual property, contractual obligations, off-balance sheet arrangements, and other such requirements. Our net cash from operations and cash and cash equivalents are key sources of liquidity to meet our ongoing cash needs. In addition to these sources, we also rely on access to our revolving credit facilities, bank conduit facilities, and continued access to debt markets. Our discussion below highlights these sources of liquidity and how they have been utilized to support our cash needs.

$1.0 Billion Revolving Credit Facility

We generally utilize our revolving credit facility to finance our short-term to medium-term business operations, as needed. As a precautionary measure at the onset of the global pandemic, in March 2020 we fully drew down our $1.0 billion revolving credit facility. Based on the ongoing recovery of our business to date, our strong liquidity position and ability to access secured debt capital markets, we fully repaid the remaining outstanding revolver balance as of December 31, 2021, and had $998 million of available capacity on our revolving credit facility, net of letters of credit.

On July 15, 2020, we entered into the First Amendment governing our revolving credit facility and term loan B. The First Amendment established a Relief Period with respect to our secured revolving credit facility, which commenced on July 15,

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2020, and was scheduled to end on April 1, 2022. Among other changes, the First Amendment added a new minimum liquidity covenant, tested quarterly until the end of the Relief Period, of (i) $250 million plus (ii) 50% of the aggregate amount of dividends paid after the effective date of the First Amendment and on or prior to the last day of the relevant fiscal quarter. On October 22, 2021, we entered into the Second Amendment governing our revolving credit facility and term loan B which resulted in the termination of this Relief Period and extended the commitment period for the revolving credit facility from May 2023 to October 2026.

The revolving credit facility and term loan B are subject to covenants including the maintenance of specific financial ratios as defined in the credit agreement. The financial ratio covenants consist of a minimum interest coverage ratio and a maximum first lien leverage ratio. The interest coverage ratio is calculated by dividing consolidated EBITDA (as defined in the credit agreement) by consolidated interest expense (as defined in the credit agreement), both as measured on a trailing 12-month basis preceding the measurement date. The first lien leverage ratio is calculated by dividing consolidated first lien debt (as defined in the credit agreement) as of the measurement date by consolidated EBITDA (as defined in the credit agreement) as measured on a trailing 12-month basis preceding the measurement date. The Second Amendment stipulates a first lien leverage ratio financial covenant not to exceed 4.75 to 1.0 commencing with the December 31, 2021 period through June 30, 2022, after which time it will return to 4.25 to 1.0, the level in existence prior to the effective date of the First Amendment. It also reestablished the interest coverage ratio (as defined in the credit agreement) of no less than 2.5 to 1.0, the level existing prior to the effective date of the First Amendment. Additionally, the Second Amendment reestablished the annual interest rate in existence prior to the effective date of the First Amendment which is equal to, at our option, either a base rate plus a margin ranging from 0.75% to 1.25% or the London Interbank Offered Rate (“LIBOR”) plus a margin ranging from 1.75% to 2.25%, in either case based upon our first lien leverage ratio. The Second Amendment also includes customary LIBOR replacement language providing for alternative interest rate option upon the cessation of LIBOR publication.

As of December 31, 2021, our first lien leverage ratio was 3.99 to 1.0 and our interest coverage ratio was 4.00 to 1.0. These ratios do not include interest expense or indebtedness related to any qualified securitization financing (as defined in the credit agreement). As of December 31, 2021, we were in compliance with the financial covenants described above.

Secured Notes and Term Loan B

We generally utilize borrowing under our secured notes to meet our long-term financing needs. During 2020 we issued $650 million senior secured notes due 2026 with an interest rate of 6.625% and during 2021, we issued $650 million of senior secured notes due 2029 with an interest rate of 4.50%. These transactions positively impacted our liquidity and reinforce our expectation that we will maintain adequate liquidity for the next year and beyond.

During 2021, we repaid our $250 million 5.625% secured notes due March 2021 and our $650 million 4.25% secured notes due March 2022. As of December 31, 2021, we had $3.37 billion outstanding of secured notes and Term Loan B, with maturities ranging from 2023 to 2030.

Non-recourse Vacation Ownership Debt

Our vacation ownership business finances certain of its VOCRs through (i) asset-backed conduit facilities and (ii) term asset-backed securitizations, all of which are non-recourse to us with respect to principal and interest. For the securitizations, we pool qualifying VOCRs and sell them to bankruptcy-remote entities, all of which are consolidated into the accompanying Consolidated Balance Sheets as of December 31, 2021. We plan to continue using these sources to finance certain VOCRs. We believe that our USD bank conduit facility with a term through October 2022, which we expect to extend prior to its expiration, and our AUD/NZD bank conduit facility, with a term through April 2023, amounting to a combined capacity of $1.02 billion ($698 million available as of December 31, 2021), along with our ability to issue term asset-backed securities, provide sufficient liquidity to finance the sale of VOIs beyond the next year.

We closed on securitization financings of $850 million in 2021 and $900 million in 2020. These transactions positively impacted our liquidity and reinforce our expectation that we will maintain adequate liquidity for the next year and beyond.

Our liquidity position may be negatively affected by unfavorable conditions in the capital markets in which we operate or if our VOCR portfolios do not meet specified portfolio credit parameters. Our liquidity, as it relates to our VOCR securitization program, could be adversely affected if we were to fail to renew or replace our conduit facilities on their expiration dates, or if a particular receivables pool were to fail to meet certain ratios, which could occur in certain instances if the default rates or other credit metrics of the underlying VOCRs deteriorate. Our ability to sell securities backed by our VOCRs depends on the continued ability and willingness of capital market participants to invest in such securities.

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Each of our non-recourse, securitized term notes, and the bank conduit facilities contain various triggers relating to the performance of the applicable loan pools. If the VOCR pool that collateralizes one of our securitization notes fails to perform within the parameters established by the contractual triggers (such as higher default or delinquency rates), there are provisions pursuant to which the cash flows for that pool will be maintained in the securitization as extra collateral for the note holders or applied to accelerate the repayment of outstanding principal to the note holders. As of December 31, 2021, all of our securitized loan pools were in compliance with applicable contractual triggers.

We may, from time to time, depending on market conditions and other factors, repurchase our outstanding indebtedness, whether or not such indebtedness trades above or below its face amount, for cash and/or in exchange for other securities or other consideration, in each case in open market purchases and/or privately negotiated transactions.

For additional details regarding our credit facilities, term loan B, and non-recourse debt see Note 16—Debt to the Consolidated Financial Statements.

Material Cash Requirements

The following table summarizes material future contractual obligations of our continuing operations (in millions). We plan to fund these obligations along with our other cash requirements with net cash from operations, cash and cash equivalents as well as access to our revolving credit facilities, bank conduit facilities, and continued access to debt markets.

(a)Represents debt that is securitized through bankruptcy-remote special purpose entities the creditors of which have no recourse to us for principal and interest.

(b)Includes interest on both debt and non-recourse debt; estimated using the stated interest rates.

(c)Includes (i) $656 million for marketing related activities, (ii) $61 million relating to the development of vacation ownership properties, and (iii) $45 million for information technology activities.

(d)Represents obligations to repurchase completed vacation ownership properties from third-party developers (see Note 11—Inventory to the Consolidated Financial Statements for further detail) of which $13 million is included within Accrued expenses and other liabilities on the Consolidated Balance Sheets.

(e)Excludes a $38 million liability for unrecognized tax benefits since it is not reasonably estimable to determine the periods in which such liability would be settled with the respective tax authorities.

In addition to the amounts shown in the table above and in connection with our separation from Cendant, we entered into certain guarantee commitments with Cendant (pursuant to our assumption of certain liabilities and our obligation to indemnify Cendant, Realogy, and Travelport for such liabilities) and guarantee commitments related to deferred compensation arrangements with Cendant and Realogy. We also entered into certain guarantee commitments related to the sale of our European vacation rentals business. For information on matters related to our former parent and subsidiaries see Note 29—Transactions with Former Parent and Former Subsidiaries to the Consolidated Financial Statements.

In addition to the key contractual obligation and separation related commitments mentioned above, we have the following other commercial commitments and off-balance sheet arrangements:

We enter into agreements that contain standard guarantees and indemnities whereby we indemnify another party for specified breaches of, or third-party claims relating to, an underlying agreement. Such underlying agreements are typically entered into by one of our subsidiaries. The various underlying agreements generally govern purchases, sales or outsourcing of products or services, leases of real estate, licensing of software and/or development of vacation ownership properties, access to credit facilities, derivatives, and issuances of debt securities. We also provide corporate guarantees for our operating business units relating to merchant credit-card processing for prepaid customer stays and other deposits. While a majority of these guarantees

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and indemnifications extend only for the duration of the underlying agreement, some survive the expiration of the agreement. We are not able to estimate the maximum potential amount of future payments to be made under these guarantees and indemnifications as the triggering events are not predictable. In certain cases we maintain insurance coverage that may mitigate any potential payments.

Our vacation ownership business provides guarantees to certain owners’ associations for funds required to operate and maintain vacation ownership properties in excess of assessments collected from owners of the VOIs. We may be required to fund such a shortfall as a result of unsold company-owned VOIs or failure by owners to pay such assessments. In addition, from time to time, we may agree to reimburse certain owner associations up to 80% of their uncollected assessments. These guarantees extend for the duration of the underlying subsidy or similar agreement (which generally approximate one year and are renewable at our discretion on an annual basis). The maximum potential future payments that we could be required to make under these guarantees was $518 million as of December 31, 2021. We would only be required to pay this maximum amount if none of the assessed owners paid their assessments. Any assessments collected from the owners of the VOIs would reduce the maximum potential amount of future payments to be made by us. Additionally, should we be required to fund the deficit through the payment of any owners’ assessments under these guarantees, we would be permitted to use that property to engage in revenue-producing activities such as rentals. During 2021, 2020, and 2019, we made payments related to these guarantees of $13 million, $13 million, and $11 million. As of December 31, 2021 and 2020, we maintained a liability in connection with these guarantees of $32 million and $26 million included within Accrued expenses and other liabilities on the Consolidated Balance Sheets.

As part of the Fee-for-Service program, we may guarantee to reimburse the developer or to purchase inventory from the developer, for a percentage of the original sale price if certain future conditions exist. As of December 31, 2021, the maximum potential future payments that we may be required to make under these guarantees is $41 million. As of December 31, 2021 and 2020, we had no recognized liabilities in connection with these guarantees.

We generally utilize letters of credit to support the securitization of VOCR fundings, certain insurance policies, and development activities in our vacation ownership business. As of December 31, 2021, we had $36 million of irrevocable standby letters of credit outstanding, of which $2 million were under our revolving credit facilities. As of December 31, 2020, we had $127 million of irrevocable standby letters of credit outstanding, of which $96 million were under our revolving credit facilities. Such letters of credit issued during 2020 included a $48 million letter of credit for guarantees related to the sale of the European vacation rentals business in which Wyndham Hotels and Travel + Leisure Co. were required to maintain certain credit ratings. This letter of credit was released during 2021, see Note 29—Transactions with Former Parent and Former Subsidiaries to the Consolidated Financial Statements for additional details.

We primarily utilize surety bonds in our vacation ownership business for sales and development transactions in order to meet regulatory requirements of certain states. In the ordinary course of our business, we have assembled commitments from 12 surety providers in the amount of $2.3 billion, of which we had $292 million outstanding as of December 31, 2021. The availability, terms and conditions, and pricing of bonding capacity are dependent on, among other things, continued financial strength and stability of the insurance company affiliates providing the bonding capacity, general availability of such capacity, and our corporate credit rating. If the bonding capacity is unavailable or, alternatively, the terms and conditions and pricing of the bonding capacity are unacceptable to us, our vacation ownership business could be negatively impacted.

We have Company sponsored severance plans in place for certain employees in the event of involuntary terminations, other than for cause. As of December 31, 2021, our maximum obligation under these severance plans was $152 million. Refer to the Proxy Statement for our 2022 Annual Meeting of Shareholders under the captions “Compensation of Directors,” “Executive Compensation” and “Committees of the Board” for additional details regarding executive compensation.

Our secured debt is rated Ba3 with a “negative outlook” by Moody’s Investors Service, BB- with a “stable outlook” by

Standard & Poor’s Rating Services, and BB+ with a “negative outlook” by Fitch Rating Agency. A security rating is not a recommendation to buy, sell or hold securities and is subject to revision or withdrawal by the assigning rating organization.

Reference in this report to any such credit rating is intended for the limited purpose of discussing or referring to aspects of our liquidity and of our costs of funds. Any reference to a credit rating is not intended to be any guarantee or assurance of, nor should there be any undue reliance upon, any credit rating or change in credit rating, nor is any such reference intended as any inference concerning future performance, future liquidity or any future credit rating. For information regarding the impact of changes to our credit rating and the credit rating of Wyndham Hotels, see Note 29—Transactions with Former Parent and Former Subsidiaries—Matters Related to the European Vacation Rentals Business to the Consolidated Financial Statements.

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We are currently evaluating the impact of the transition from LIBOR as an interest rate benchmark to other potential alternative reference rates, including but not limited to the Secured Overnight Financing Rate (“SOFR”). Currently, we have debt and derivative instruments in place that reference LIBOR-based rates. Although certain of these LIBOR based obligations provide for alternative methods of calculating the related interest rate payable (including transition to an alternative benchmark rate) if LIBOR is not reported, uncertainty as to the extent and manner of future changes may result in interest rates and/or payments that are higher than, lower than, or that do not otherwise correlate over time with the interest rates and/or payments that would have been made on our obligations if LIBOR was available in its current form. The transition from LIBOR based benchmark rates is expected to begin January 1, 2022 and be completed when USD LIBOR rates are phased out by June 30, 2023. Management will continue to actively assess the related opportunities and risks involved in this transition.

We adopted appropriate LIBOR replacement rate transition language into the agreements for the renewal of our USD bank conduit facility in 2020 and the renewal of the credit agreement governing the revolving credit facility and term loan B which closed on October 22, 2021. These agreements represented our largest exposure to LIBOR.

CASH FLOWS

The following table summarizes the changes in cash, cash equivalents and restricted cash between 2021 and 2020 (in millions). For a comparative review of the fiscal years ended December 31, 2020 and 2019, refer to the Cash Flows section in Part II, Item 7 of our Annual Report on Form 10-K filed with the SEC on February 24, 2021.

Operating Activities

Net cash provided by operating activities was $568 million for the year ended December 31, 2021, compared to $374 million in the prior year. This $194 million increase in 2021 was primarily driven by a $563 million increase in net income from continuing operations; partially offset by a $281 million decrease in non-cash add-back items, mainly lower provision for loan losses, and a $91 million increase in cash utilized for working capital.

Investing Activities

Net cash used in investing activities from continuing operations was $93 million for the year ended December 31, 2021, compared to $60 million in the prior year. This increase in cash used was primarily driven by $37 million of cash payments for the acquisition of the Travel + Leisure brand in 2021; partially offset by $12 million lower property and equipment additions in 2021.

Net cash used in investing activities from discontinued operations was $5 million for the year ended December 31, 2020, which was related to the sale of the European vacation rentals business.

Financing Activities

Net cash used in financing activities was $1.29 billion for the year ended December 31, 2021, compared to net cash provided of $502 million in the prior year. The variance was primarily due to higher net repayments in 2021 due to the early payoff of our $650 million notes due March 2022, the net payoff of our secured revolving credit facility of $547 million, and payoff of our $250 million notes due March 2021, partially offset by the issuance of $650 million notes due December 2029; compared to prior year proceeds from the issuance of $650 million notes and $547 million of net proceeds from borrowings under our secured revolving credit facility. The variance was also due to $103 million of decreased share repurchase activity in 2021 compared to 2020.

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Capital Deployment

We focus on deploying capital for the highest possible returns. Ultimately, our business objective is to grow our business while optimizing cash flow and Adjusted EBITDA. We intend to continue to invest in select capital and technological improvements across our business. We may also seek to strategically grow the business through merger and acquisition activities. As part of our merger and acquisition strategy, we have made, and expect to continue to make, acquisition proposals and enter into non-binding letters of intent, allowing us to conduct due diligence on a confidential basis. A potential transaction contemplated by a letter of intent may never reach the point where we enter into a definitive agreement, nor can we predict the timing of such a potential transaction. Finally, we intend to continue to return value to shareholders through the repurchase of common stock and payment of dividends. All future declarations of quarterly cash dividends are subject to final approval by the Board.

On October 22, 2021, we renewed the credit agreement governing our revolving credit facility and term loan B. The renewal eliminated the Relief Period restrictions on share repurchases, among other changes, and we resumed share repurchases during the fourth quarter of 2021.

During 2021, we spent $165 million on vacation ownership development projects (inventory). We believe that our vacation ownership business currently has adequate finished inventory to support vacation ownership sales for several years. The average inventory spend on vacation ownership development projects for the five-year period from 2022 through 2026 is expected to be between $140 million and $170 million annually. After factoring in the anticipated additional average annual spending, we expect to have adequate inventory to support vacation ownership sales through at least the next four to five years.

During 2021, we invested $57 million on capital expenditures, primarily on information technology and sales center improvement projects. During 2022, we anticipate investing $60 million to $65 million on capital expenditures.

In connection with our focus on optimizing cash flow, we are continuing our asset-light efforts in vacation ownership by seeking opportunities with financial partners whereby they make strategic investments to develop assets on our behalf. We refer to this as Just-in-Time. The partner may invest in new ground-up development projects or purchase from us, for cash, existing in-process inventory which currently resides on our balance sheet. The partner will complete the development of the project and we may purchase finished inventory at a future date as needed or as obligated under the agreement.

We expect that the majority of the expenditures that will be required to pursue our capital spending programs, strategic investments and vacation ownership development projects will be financed with cash flow generated through operations and cash and cash equivalents. We expect that additional expenditures will be financed with general secured corporate borrowings, including through the use of available capacity under our revolving credit facility.

Share Repurchase Program

On August 20, 2007, our Board authorized a share repurchase program that enables us to purchase our common stock. The Board has since increased the capacity of the program eight times, most recently in October 2017 by $1.0 billion, bringing the total authorization under the current program to $6.0 billion. Proceeds received from stock option exercises increased our repurchase capacity by $81 million since the inception of this program. We had $328 million of remaining availability in our program as of December 31, 2021.

Under our current share repurchase program, we repurchased 0.5 million shares at an average price of $52.94 for a cost of $26 million during the year ended December 31, 2021. The amount and timing of specific repurchases are subject to market conditions, applicable legal requirements and other factors, including capital allocation priorities. Repurchases may be conducted in the open market or in privately negotiated transactions. We suspended share repurchase activity in March 2020 due to uncertainty associated with COVID-19. On July 15, 2020, we entered into the First Amendment to the credit agreement governing our revolving credit facility and term loan B. Among other changes, the First Amendment placed us into a Relief Period from July 15, 2020 through April 1, 2022 that prohibited the use of cash for share repurchases during this period. On October 22, 2021, we entered into the Second Amendment which renewed the credit agreement governing our revolving credit facility and term loan B. This Second Amendment eliminated the Relief Period restrictions on share repurchases, among other changes. In connection with this Second Amendment we resumed share repurchases during the fourth quarter of 2021.

Dividends

During 2021, we paid cash dividends of $0.30 per share for the first, second, and third quarters, and $0.35 per share for the fourth quarter. During 2020, we paid cash dividends of $0.50 per share for the first and second quarters, and $0.30 per share for the third and fourth quarters. We paid cash dividends of $0.45 per share for all four quarters of 2019. The aggregate of dividends paid to shareholders for 2021, 2020, and 2019, were $109 million, $138 million, and $166 million.

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The First Amendment, which we entered into on July 15, 2020, among other changes, established a Relief Period which added a new minimum liquidity covenant, tested quarterly until the end of the Relief Period, of (i) $250 million plus (ii) 50% of the aggregate amount of dividends paid after the effective date of the First Amendment and on or prior to the last day of the relevant fiscal quarter. Additionally, the First Amendment limited the payout of dividends during the Relief Period to not exceed $0.50 per share, the rate in effect prior to the First Amendment. The Second Amendment, which was entered into on October 22, 2021, renewed the credit agreement governing our revolving credit facility and term loan B and terminated the Relief Period which, among other changes, eliminated the restrictions on dividends and the Relief Period minimum liquidity covenant established by the First Amendment.

Although our quarterly dividend was previously reduced due to the impacts of COVID-19, we were able to increase our dividend in the fourth quarter of 2021 and our long-term expectation is to grow our dividend at the rate of growth of our earnings at a minimum. The declaration and payment of future dividends to holders of our common stock are at the discretion of our Board and depend upon many factors, including our financial condition, earnings, capital requirements of our business, covenants associated with certain debt obligations, legal requirements, regulatory constraints, industry practice and other factors that our Board deems relevant. There is no assurance that a payment of a dividend or a dividend at current levels will occur in the future.

Foreign Earnings

We assert that substantially all undistributed foreign earnings will be reinvested indefinitely as of December 31, 2021. In the event we determine not to continue to assert that all or part of our undistributed foreign earnings are permanently reinvested, such a determination in the future could result in the accrual and payment of additional foreign withholding taxes, as well as U.S. taxes on currency transaction gains and losses, the determination of which is not practicable.

SEASONALITY

We experience seasonal fluctuations in our net revenues and net income from sales of VOIs and vacation exchange fees. Revenues from sales of VOIs are generally higher in the third quarter than in other quarters due to increased leisure travel. Revenues from vacation exchange fees are generally highest in the first quarter, which is generally when members of our vacation exchange business book their vacations for the year. Our seasonality has been and could continue to be impacted by COVID-19.

The seasonality of our business may cause fluctuations in our quarterly operating results. As we expand into new markets and geographical locations, we may experience increased or different seasonality dynamics that create fluctuations in operating results different from the fluctuations we have experienced in the past.

COMMITMENTS AND CONTINGENCIES

From time to time, we are involved in claims, legal and regulatory proceedings, and governmental inquiries related to our business, none of which, in the opinion of management, is expected to have a material effect on our results of operations or financial condition. See Note 20—Commitments and Contingencies to the Consolidated Financial Statements for a description of claims and legal actions arising in the ordinary course of our business along with our guarantees and indemnifications and Note 29—Transactions with Former Parent and Former Subsidiaries to the Consolidated Financial Statements for a description of our obligations regarding Cendant contingent litigation, matters related to Wyndham Hotels, matters related to the European vacation rentals business, and matters related to the North American vacation rentals business.

CRITICAL ACCOUNTING ESTIMATES

In presenting our financial statements in conformity with GAAP, we are required to make estimates and assumptions that affect the amounts reported therein. Several of the estimates and assumptions we are required to make relate to matters that are inherently uncertain as they pertain to future events. However, events that are outside of our control cannot be predicted and, as such, they cannot be contemplated in evaluating such estimates and assumptions. If there is a significant unfavorable change to current conditions, it could result in a material impact to our consolidated results of operations, financial position, and liquidity. We believe that the estimates and assumptions we used when preparing our financial statements were the most appropriate at that time. In addition to our significant accounting policies referenced in Note 2—Summary of Significant Accounting Policies to the Consolidated Financial Statements, presented below are the critical accounting estimates that we believe require subjective and complex judgments that could potentially affect reported results.

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Vacation Ownership Revenue Recognition and Allowance for Loan Losses. Our sales of VOIs are either cash sales or developer-financed sales. For developer-financed sales, we project our losses for uncollectible accounts over the entire lives of our notes. This estimate of uncollectible consideration reduces the amount of revenue recognized at the time of sale and establishes an allowance for loan loss which reduces the receivable.

Our estimates of uncollectible amounts are based on the results of our static pool analysis which tracks defaults for each year’s sales over the entire life of those contract receivables. We consider current defaults, past due aging, historical write-offs of contracts and consumer credit scores (FICO scores) in the assessment of a borrower’s credit strength, down payment amount and expected loan performance. We also consider whether the historical economic conditions are comparable to current economic conditions. If current or expected future conditions differ from the conditions in effect when the historical experience was generated, we adjust the allowance for loan losses to reflect the expected effects of the current environment on the collectability of our VOCRs. There were no changes to the assumptions used in this model in 2021.

In March 2020, as a result of the COVID-19 pandemic’s impact on our owners’ ability to repay their contract receivables, we added an additional model that increased the allowance for loan losses by $225 million, representing 6% of gross VOCRs as of March 31, 2020. This additional model was based upon historical data on the relationship between unemployment rates and net new defaults. The model provided for the full estimated impact of a recession (approximately 15-20 months from the peak of unemployment) based on our historical data from the recession in 2008. Based upon improved performance in our portfolio (lower net new defaults) and improved unemployment rates, we reversed $111 million of the initial $225 million provision recorded in March 2020. After considering write-offs and the allowance for remaining likely defaults associated with loans that were granted payment deferrals, we have no COVID-19 related allowances as of December 31, 2021. The allowance for loan losses is our most significant and complex estimate. Over the past five years, the year-end allowance as a percentage of gross VOCRs has ranged from 18.1% to 19.5% with the exception of 2020 which was 21.8% as a result of the impact of COVID-19. See Note 10—Vacation Ownership Contract Receivables to the Consolidated Financial Statements for additional details of changes in the COVID-19 estimates and impacts to the financial statements.

Inventory. We use the relative sales value method of costing and relieving our VOI inventory. This method requires us to make estimates subject to significant uncertainty, including future sales prices and volumes as well as credit losses and related inventory recoveries. The impact of any changes in estimates under the relative sales value method is recorded in Cost of vacation ownership interests on the Consolidated Statements of Income/(Loss) in order to retrospectively adjust the margin previously recorded subject to those estimates. There were no changes in these assumptions during 2021.

Impairment of Long-Lived Assets. We perform an annual review of our goodwill and other indefinite-lived intangible assets, or more frequently if indicators of potential impairment exist. This analysis requires significant judgments, including anticipated market conditions, operating expense trends, estimation of future cash flows, which are dependent on internal forecasts, and estimation of long-term rate of growth. The estimates used to calculate the fair value of other indefinite-lived intangible assets change from year to year based on operating results and market conditions. There were no changes in the assumptions used in this analysis in 2021. Changes in these estimates and assumptions could materially affect the determination of fair value and the other indefinite-lived intangible assets impairment.

Business Combinations. A component of our growth strategy has been to acquire and integrate businesses that complement our existing operations. We account for business combinations in accordance with the guidance for business combinations and related literature. Accordingly, we allocate the purchase price of acquired companies to the tangible and intangible assets acquired and liabilities assumed based upon their estimated fair values at the date of purchase. The difference between the purchase price and the fair value of the net assets acquired is recorded as goodwill.

In determining the fair values of assets acquired and liabilities assumed in a business combination, we use various recognized valuation methods including present value modeling and referenced market values (where available). Further, we make assumptions within certain valuation techniques including discount rates and timing of future cash flows. Valuations are performed by management or independent valuation specialists under management’s supervision, where appropriate. We believe that the estimated fair values assigned to the assets acquired and liabilities assumed are based on reasonable assumptions that marketplace participants would use. However, such assumptions are inherently uncertain and actual results could differ from those estimates.

Guarantees. In the ordinary course of business, we enter into agreements that contain standard guarantees and indemnities whereby we indemnify another party for specified breaches of, or third-party claims relating to, an underlying agreement. Such underlying agreements are typically entered into by one of our subsidiaries. The various underlying agreements generally govern purchases, sales or outsourcing of products or services, leases of real estate, licensing of software and/or development of

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vacation ownership properties, access to credit facilities, derivatives and issuances of debt securities. Also in the ordinary course of business, we provide corporate guarantees for our operating business units relating to merchant credit-card processing for prepaid customer stays and other deposits. While a majority of these guarantees and indemnifications extend only for the duration of the underlying agreement, some survive the expiration of the agreement. We are not able to estimate the maximum potential amount of future payments to be made under these guarantees and indemnifications as the triggering events are not predictable. In certain cases, we maintain insurance coverage that may mitigate any potential payments.

Income Taxes. We regularly review our deferred tax assets to assess their potential realization and establish a valuation allowance for portions of such assets that we believe will not be ultimately realized. In performing this review, we make estimates and assumptions regarding projected future taxable income, the expected timing of the reversals of existing temporary differences and the implementation of tax planning strategies. 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 impact our results of operations.

For tax positions we have taken or expect to take in our tax return, we apply a more likely than not threshold, under which we must conclude a tax position is more likely than not to be sustained, assuming that the position will be examined by the appropriate taxing authority that has full knowledge of all relevant information, in order to recognize or continue to recognize the benefit. In determining our provision for income taxes, we use judgment, reflecting our estimates and assumptions, in applying the more likely than not threshold.