Travel & Leisure Co. (TNL) FY 2024 MD&A

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.