© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good morning, and welcome to the Hilton Grand Vacations' Fourth Quarter 2019 Earnings Conference Call. A telephone replay will be available for seven days following this call. The dial-in number is 844-512-2921, and PIN is 13697040#. At this time all participants have been placed in a listen-only mode and the floor will be opened for your questions following the presentation. [Operator Instructions] I would now like to turn the call over to Mark Melnyk, Vice President of Investor Relations. Please go ahead, sir.
Thank you, Operator. Welcome to the Hilton Grand Vacations Fourth Quarter 2019 Earnings Call. Before we get started, please be reminded that our discussions this morning will include forward-looking statements. Actual results could differ materially from those indicated by these forward-looking statements, and these statements are effective only as of today. We undertake no obligation to publicly update or revise these statements. For a discussion of some of the factors that could cause actual results to differ, please refer to the Risk Factors section of our 10-K. We will also be referring to certain non-GAAP financial measures. You can find definitions and components of such non-GAAP numbers, as well as reconciliations of non-GAAP and GAAP financial measures discussed today, in our earnings press release and on our website at investors.hgv.com.
As a reminder, our reported results for both periods in 2019 and 2018 reflect accounting rules under ASC 606, which we adopted in 2018. Under ASC 606, we are required to defer certain revenues and expenses related to sales made in the period when a project is under construction and then hold off on recognizing those revenues and expenses until the period when construction is completed. To help you make more meaningful period-to-period comparisons, you can find details of our current and historical deferrals and recognitions in Table T-1 of our earnings release. Also, for ease of comparability and to simplify our discussion today, our comments on Adjusted EBITDA and our real estate results will refer to results excluding the net impact of construction-related deferrals and recognitions for all reporting periods.
Finally, unless otherwise noted, results discussed today refer to fourth quarter 2019, and all comparisons are accordingly against fourth quarter of 2018. In a moment, Mark Wang, our President and Chief Executive Officer, will provide highlights from the quarter, in addition to an update of our current operations and company strategy. After Mark's comments, our Chief Financial Officer, Dan Mathewes, will go through the financial details for the quarter and our forward expectations. After that, Mark and Dan will make themselves available for your questions.
With that, let me turn the call over to our President and CEO, Mark Wang. Mark?
Morning everyone. Earlier today, we released our fourth quarter results. Total revenues were up 3% and contract sales grew 1.4%. For the year, contract sales were flat and finished inline with the guidance we provided last quarter. NOG was 5.5% and marked our 27th consecutive year of net order growth. Adjusted EBITDA grew 18% to $124 million with margins at 25% up 320 basis points versus last year. For the year our adjusted EBITDA was up 7% to $453 million versus our revised guidance of 415 to $435 million. Our margins were 24%, up 85 basis points versus 2018. I think that says a lot about our team and our model that we were ultimately able to deliver solid EBITDA growth and margins during the transitionary period for our portfolio. It was no easy task and I applaud our teams for their efforts.
Now, let's jump into what we saw in the quarter and the year. In our real estate segment, our Q4 contract sales growth was driven by 5% increase in tours offset by lower VPGs. Our fourth quarter close rates increased year-over-year as operational improvements and a continued focus on execution drove an acceleration in our transaction growth each quarter of 2019. Regionally, we saw growth in tourism both the Mainland and APAC and we saw close rates up in both regions as well contributing equally to the gain we saw in the quarter. Owner engagement remains strong with arrivals up 7% for the year, and our capital efficient mix increased 500 basis points to 83% of contract sales underscoring our commitment to efficient inventory sourcing. Our non real estate business continued to demonstrate strength, fueled by NOG. At our Club and Resort business the compounding benefits of growing our member base resulted in another solid quarter with record revenues of $61 million and EBITDA $49 million for margins of 80%. This capped off a strong year for the business with EBITDA at $145 million and revenues of $191 million, and our member base now stands at over 325,000 members.
Our financing business also generated another solid quarter with EBITDA of $29 million on revenues of $43 million from margin of 67%. For the year, revenues of $170 million and EBITDA of 117 million continue to provide us with a stream of consistent, high-margin cash flow in addition to the well-received ABS offering that we talked about in the third quarter.
Now I'd to talk you through some of our near-term initiatives that we're focused on for 2020. As it relates to inventory, we're just beginning to realize the initial benefits of the inventory investments we have made over the past two years. We recently received approval from New York to begin sales to the Quinn and from Hawaii to begin sales of Phase 2 of Ocean Tower. And as we move through the year and obtain additional state regulatory approvals, we will expand their distribution into our sales network. We expect sales to gain momentum each quarter as these projects ramp, resulting in strong contract sales run rate as we exit the year. In addition, we expect to receive approval to commence initial offside sales of our Maui and cover project in the first half of this year, and we're excited to enter these two new markets. We will also start sales of our sequel property in Waikiki in the second half. Sales at these properties will build through the back half of this year and into 2021 as we layer on additional distribution. Along with this new inventory, we're laser-focused on execution. In addition to the process adjustments and key sale centers that we touched on last year, we've taken additional steps to bolster our sales teams training and aligned our incentive programs to focus more sharply on execution metrics.
At our Club and Resort business, we're piling in a cash and points initiative that allows owners to supplement their point packages with cash, providing them with flexibility to maximize their points and expand their usage of the HGV network and we'll build upon the success of our owner exclusive programs that we've piloted last year, which drives increase our occupancy during low seasonal periods. These programs are part of our commitment to continually improve the guest experience, which supports our customer loyalty and creates value for HGV well beyond their initial purchase. And company-wide, we'll maintain our cost discipline as we capitalize on these initiatives.
Corporate G&A was down 17% in the quarter to $24 million and we believe this is a sustainable level of spending that will still support our anticipated growth. This should also allow us to maintain industry-leading EBITDA margins despite a headwind and our Rental and Ancillary division as we transition to Quinn from rental to timeshare. Shifting to the longer-term, we continue to make strides in our strategic growth initiatives including continued investment in technology to enable increasingly sophisticated multichannel, data-enabled marketing efforts. We see this as key to our ability to attract a right customer to the right distribution center and offer them the right product at the right time.
In 2019, we created a new campaign analysis tools to help us improve our tour efficiency, and we invested in our campaign management capabilities support current and future high-volume, multi-channel campaigns. We invested in a new web foundation and launched a new unified site it's hiltongrandvacations.com that will help us better convert qualified prospects into leads, and ultimately in orders. We advanced our consumer data quality and actionability, and as a result our digitally sourced leads became a larger part of our marketing mix with over 30,000 packages sold for the year. In 2020, we'll continue to invest in this important digital strategy to refine and optimize these processes and make consumer data an even stronger part of our marketing plans going forward, and we'll work closely with Hilton to apply this data in new ways throughout our marketing channels.
Overall, I'm excited about what the future holds for HGV. Over the past decade, we more than doubled our order base, tour flow, contract sales and EBITDA all while never losing focus on providing our guest with exceptional customer experiences. While I wasn't satisfied with our 2019 results, I'm encouraged by how we closed out a challenging year and looking ahead, I think that, we have the right brand, the right team and the right inventory in place to deliver another strong decade of performance for HGV.
Before we move to Dan, I'd like to provide an update on coronavirus. On February 14, we were informed that a guest who stayed at our Grand Waikiki property was later diagnosed with the virus after returning home to Japan. The health and safety of our owners, guests and team members is always our highest priority and we acted swiftly to implement emergency procedures and protocols and we're in continuous communication with both local and national health agencies. On February 21st we pass through the 14 days suggested moderating period from when the guests departed our property and have received no reports of further infections. I'm proud of how our team reacted to successfully address the incident with our owners, guests, team members and the community. Like many travel-related companies, we have experienced some disruption since the onset as the media coverage surrounding the virus, mainly in Japan. Given the importance of our business in Japan and Hawaii, we felt it would be prudent to frame a potential impact from the virus. This situation obviously remained very fluid, but having experienced similar disruptive events in the past, the prepaid nature of our product and the desire of our guests to travel leaves me confident in the resilience of our business.
I'll turn things over to Dan and give you additional details and walk you through our financial results.
Thank you Mark and good morning everyone. Before getting into the results, I'd like to cover a quick refresher on deferrals. As you will recall, our model allows us to pre-sale new projects up to two years in advance of opening. GAAP ASC 606 requires that we defer the revenue, cost of product and direct SG&A associated with those pre-sales until we open the property for occupancy. Put simply this requirement creates deferral items on our balance sheet that grows during the presale phase and consequently there's an artificial reduction to adjusted EBITDA during this period.
Once we obtain a temporary certificate of occupancy for our project, we reverse those items in their entirety, creating a large positive income statement recognition that inflates EBITDA in that period. As these adjustments create misleading volatility in our revenues and EBITDA and the sales booked during the presale period generate cash flow, we manage our business internally by focusing on earnings, excluding deferrals and recognitions. Hence, all references to net income, adjusted EBITDA and real estate results on this call for current, prior and future periods, exclude the impact of deferrals and recognitions. This quarter deferrals were a drag of $19 million on our reported ASC 606 EBITDA. Further details can be found in tables T-1 and T-15 in our press release and a complete accounting of our historical deferral recognition activity can you found in Excel format on the Financial Reporting section of our Investor Relations site. We would encourage you to reach out to Mark Melnyk for additional help in understanding deferrals in your modeling and valuation work.
Now let's turn to the results for the fourth quarter and full year 2019. Total fourth quarter revenues increased 2.9% to $503 million, reflecting growth in our Real Estate, Resort and Club and Financing businesses with flat Rental and Ancillary revenues. Q4 adjusted EBITDA came in at $124 million versus $105 million last year, a year-over-year increase of 18%. Q4 adjusted EBITDA also came in well ahead of our implied guidance for Q4. These results were driven by the growth in revenues combined with a continuous focus on cost efficiency. Adjusted EBITDA margins improved by 318 basis points. It is important to note on the cost efficiency front a couple of items are specific to 2019.
Specifically, we've benefited from a gain of approximately $4 million associated with the change in certain employee benefits as well as an additional $4 million gain in our Real Estate segment, which I'll discuss in a minute. For the full year, our adjusted EBITDA was $453 million, versus $424 million last year with margins up 85 basis points to 23.6%. This includes the $8 million of unique items that I just mentioned. Net income was $91 million diluted earnings per share was $1.05, compared to net income of $39 million and diluted earnings per share of $0.40 in the fourth quarter of 2018. Full year net income was $261 million and diluted earnings per share was $2.92 versus prior year of full year net income of $219 million and diluted earnings per share of $2.24.
Within Real Estate, Q4 contract sales gained 1.4% as solid growth of 5.2%, partially offset by 2.5% decline in VBG. As Mark discussed earlier, our increased focus on execution was reflected in the gaining our close rate for the quarter, offset by the trend of lower transaction prices we've discussed on prior calls. Our provision for bad debt was 8% of owned sales, reflecting finest in static pool forecast models and underwriting strategies. The refinement to our static pool forecast model benefited our Q4 provision by approximately $4 million. Going forward, we anticipate the rate should trend between 11% and 13%.
For the full year, contract sales were flat versus our revised guidance of flat to down 3%. Fee for service mix for the quarter was 52% versus 56% last year, within our 48% to 54% guidance for the full year. With the introduction of our new projects this year, we anticipate signing a higher proportion of owned inventory and expect to see fee for service mix between 47% and 53% of our contract sales in 2020. Turning to Real Estate expenses, product cost was 26.4% in Q4 and finished the year at 23.7%. As we discussed on our last call, 2019 product cost benefited from a larger-than-normal cumulative product cost adjustment in Q3. This fact coupled with the introduction of additional inventory and higher product cost regions like New York and Hawaii will drive our overall costs of product to a range of 27% to 30% going forward.
SMG&A was 38.1% of sales and favorable by 81 basis points as a result of the improvement in close rates for the quarter that drove some operating leverage. For the year, SMG&A was 39.8% of contract sales, up 28 basis points versus 2018. Our Q4 Real Estate margin was $86 million, up 10% versus last year, margins of 31.7% were up 274 basis points. For the year, Real Estate margin was $315 million with margins of 30.6%. While we do anticipate seeing leverage on SMG&A in 2020 owing to higher sales volumes, our higher cost of product will nevertheless drive overall Real Estate segment margin compression in 2020.
At our financing business, Q4 margin was $29 million with a margin percentage of 67.4% versus a margin of $27 million at a margin percentage of 65.9% last year. So our credit trends remained stable, and our allowance for bad debt is expected to remain near current levels to due to underwriting transits implemented over the year, coupled with anticipated increases and purchases of our new projects in Hawaii by Japanese buyers that generally carry stronger credit profiles. Looking at the portfolio balance, gross receivables stood at just over $1.3 billion. Our average down payment year-to-date is 12.4%. Our average interest income rate increased to 12.5% from 12.3% last year.
Turning to our Resort and Club business now it was 5.5% for the quarter and the year, which drove an 8.9% increase in revenue to $61 million. Both Club and Resort revenue contributed to the gain and we once again reached a new high for revenue per member, $587. Margin for Q4 was up 17% to $49 million with a margin percentage of 80.3%. This quarter capped off a year of strong results for Club and Resort with revenues up 11.1% to $191 million. Margin of 145 million and margin percentage increase of $324 basis points to 75.9%.
Rental and Ancillary revenues in the fourth quarter were flat $54 million, with an increase in rental revenue offsetting the decline in ancillary revenues. The lower supply of rental rooms at the Quinn during the transition to a timeshare property will continue to be a driving growth until we lap the conversion towards the end of 2020. Rental and Ancillary expenses were $1 million higher at $39 million owing to larger subsidy requirements for newly opened properties. Our margin was $15 million with margin percentage coming at 27.8%. As we detailed in our last call the transition of the Quinn to timeshare property from a rental property is drag on the segment margins in the coming year and we anticipate a slightly higher level of margin compression in the Rental and Ancillary segment in 2020 versus what we saw in 2019.
Bridging the gap between segment adjusted EBITDA and total adjusted EBITDA, fourth quarter G&A decreased $5 million driven by the aforementioned changes to certain employee benefits as well as the result of class efficiency initiatives implemented this year. License fees were up $1 million and EBITDA from JVs was flat. Our tax rate in Q4 was 2.2% as a result of an accounting methods review recently approved by the IRS, which resulted in a benefit of $18 million being recorded in the fourth quarter. This was one time benefit and going forward our tax rate will revert to a more normalized range of 27% to 29%. At end of Q4, our net leverage stood at 1.7 times versus our target range of 1.5 to 2 times.
Looking at our liquidity position, we ended the year with $57 million of unrestricted cash, $479 million of capacity under revolver and $450 million of capacity in the warehouse. On the debt front, we had corporate debt, net of deferred financing cost of $828 million. The non-recourse debt balance of $747 million. Owing to inventory spending for new properties our Q4 adjusted free cash flow was a decline of $71 million, compared to a decline of $25 million last year. Adjusted free cash flow for the full year was $71 million. In Q4 2019, we did not complete any share repurchases. Since the programs origination in November of 2018, we have repurchased $355 million worth of shares at an average price of $29.90. $283 million of this amount was repurchased in 2019.
For 2020, we are guiding to adjusted EBITDA of $455 million to $475 million. With contract sales of plus 3% to 7%. Mark mentioned earlier, given the uncertainties associated with the coronavirus at this time, our guidance does not include the impact from the virus. But as a framework, each 5% impact to sales through our Japanese customers would be a one point impact to our contract sales growth rates and roughly $5 million to $6 million to EBITDA.
Walking through the additional items in our guidance, adjusted free cash flow is expected to be in the range of $50 million to $110 million. Net income is expected to be $253 million to $268 million or $2.91 to $3.08 on a per share basis. Both of these are excluding all deferral recognition activity, and our guidance assumes no further share repurchases based on $87 million shares outstanding. Similar to our last call, before we turn to Q&A, I'd like to remind you that we do not comment on market speculation and will not be addressing rumors. We will now turn the call over to the operator and look forward to your questions. Operator?
Thank you. [Operator Instructions] The first question come from the line of Brandt Montour of JPMorgan. Please proceed with your question.
Brandt, could you check if your phones on mute please?
I'm here. Can you hear me?
We can.
Sorry about that. Good morning. So, Mark, just qualitatively I was hoping you could maybe just give us a little bit of color on sort of the behavior of the Japanese consumer at this point in time, as much as you can, I guess tell us in terms of future packages, activity with regards to new bookings and cancellations and any other color you can give.
Sure. So, I can tell you, since the news broke early this year, we have had very minimal impact and I was checking as late as this morning. We've seen very few cancellations as far as arrivals go, owner's arrivals we have seen a bit of impact on our tour flow in Japan that was probably a little earlier on after the news hit. But, it's now picked up. So, right now the behavior is good and so we again, it's early on and things can move around and change swiftly, but right now, we're feeling like everything is fine. But, we keep hearing new news off every day.
Yeah. Thanks for that. And then I'm just kind of curious on tour growth in the quarter. Obviously a solid number but still makes the year-over-year growth in tours over the last couple of our years. Just curious if it's going on right now a lot of that kind of baked in several months in advance.
Yeah. I think, again, tour flow was solid for the year and for the quarter, came down a little bit off of our pace for the year but a lot of that was really driven by some internal initiatives that we had around tightening up some of the qualifications. But, all in all, I thought it was a good quarter we're still just that particular point, we're still waiting for some inventory to get into the system. But I think right now if you look at where our packages are starting the year we're up 14% our package for pipeline. So, we've got well over 400,000 packages sitting in our pipeline, so we're in a good position as we start off the year.
The next question comes from the line of Patrick Scholes of SunTrust Robinson, Humphrey. Please proceed with your questions.
A question for you on the share repurchase authorization. It looks like the prior one expired. I believe back in November. Is there any sense of urgency to get a new authorization?
Hey Patrick it's Dan, so far it's going well today, with regards to share repurchases, we actually it hasn't actually expired we still have about $45 million. So we simply did not repurchase any shares in the fourth quarter of 2019. And, as we've discussed before, when we look at capital allocation our number one commitment was investing in inventory and we clearly did that starting in 2018 and we're still in the process of realizing all of those commitments. Number two was returning capital to shareholders. As you can imagine, there's a number of factors that come into play when we make those decisions. We did not repurchase any shares in Q4, but it remains the number two use of capital and our mindset and given where inventory is today is the number one use and we'll go back into the market when it's appropriate.
Okay, so the latest follow up, have you repurchased any shares this quarter? Doesn't sound like you have but curious if you have and if not, are you blacked out from doing so this quarter?
We have not and we are not to be discussing anything with regards to our blackout such as stock repurchases.
Our next question comes from the line of Jared Shojaian of Wolfe Research. Please proceed with your question.
So, if I appreciate the commentary on the Japanese space age, I can purchase a little bit differently. I think about 20% of your owners are from Japan. Can you give us a sense as to what percentage of your EBITDA that represents and I guess realizing that some of the earnings contribution is from maintenance fees and financing and things that probably wouldn't really be affected by corona virus anyway. And then if you could just help us understand what percent of your EBITDA is non-US non Japan? Thank you.
Yes, so you're correct 20% of our sales are derived out of Japan. And so, we talked about half of that actually comes from sales in Japan and half of it occurs in Hawaii for those visitors coming in. So, at the end of the day, for instance if for some reason the Japanese reduce travel to Hawaii and they decided they didn't want to do some of long haul trips, we still have the ability to sell them in Japan because we have approximately we have 12 sales centers over there. As far as the percentage of EBITDA goes, I don't know Dan if we have the exact percentage on that, but…
Yeah. No. I mean, look, just to take a step back, in our prepared remarks, we did comment on what the potential impact would be and I just want to make sure that we clarify that statement to the nth degree. So, if there was a 5% impact to our Japanese consumer base, it will translate into a 1% impact to overall contract sales and then translate further down the line to EBITDA roughly $5ish million. Now, that is clearly not an ongoing scenario. If there was a scenario where things were to be persistent, we would obviously make more dramatic measures with regards to cost and all items related to the Japanese base. So, that's meant to be just an indicator of kind of short-term impact. From an overall perspective, to Mark's earlier point, Japan does represent roughly 20% of our sales and from an EBITDA perspective, it would be slightly less than that just because they're focused on higher costs of product, business as well as sales and marketing and G&A for Japan is also slightly higher than average.
Yeah. And I just add to that, Dino, again, it's early days, still uncertain how this is all going to play out. But we've faced these kinds of challenges before. I can tell you from my past experience and in some of that past experience here with Hilton Grand Vacations. You know really due to the prepaid nature of our product and divested interests that our owners have to their properties that, historically, in these kinds of events, we've bounced back very fast and 9/11, we met our objections in that year and the following year. If you look back at SARS, we had a similar disruption with our Japanese customer, but ultimately we didn't see any meaningful impact on our contract sales. It only affected us for a couple of months. Another example that I watched firsthand was Hurricane Iniki in Kauai and -- and this is really kind of an example for what I think the whole sector will experience. Back in 92, they closed the entire Island, all the visitors, and when the Island reopened, first visitors to return were Time Charters and it was well documented event, that made timeshare very popular with the local communities and officials and it helped kick to start the economy back.
But, so again, I think, it's early on. I think as far as our business goes, we're very well-positioned. We've spent now a decade selling to 50% new owners. So, we have a very healthy base of owners that are upgrading at record levels right now. We've got a lot of embedded significant recurring fees and predictable revenue. I mentioned earlier, pipeline is really strong. So, for some reason there's some delays in that pipeline we just push those customers out and so they're committed to traveling at some point. So, we feel really good that should this disruption last for a longer period of time, regardless we'll be able to bounce back quickly.
And the only thing I would add is, just an additional data point through the end of February, the impact that we've seen or what we can see today and keep in mind, while the U.S. has been hypersensitive to this over the last 14 days, and clearly this has been top of mind issue for Asia for an excess of two or three months, and I'm sure it will continue, but through the end of February, the impact from a contract sales perspective is a couple of million dollars at this point.
Great. Thank you for all of that color. And then I guess, as we look at the guidance for 2020, it looks like economic EBITDA you're expecting to grow kind of at a low single digit pace, I guess below the contract sales growth below some of the growth you had in 2019, despite all the challenges in the year, so can you talk about what may be driving that to be a little bit lower than, than those factors. And then you had mentioned you'll be at a strong rate of growth on contract sales by the end of the year a strong run rate, I think there's a terminology we use. Can you help us understand what that means. I mean, are you thinking by the end of this year, you could be back to call that double digit pace you were at a couple years ago and obviously this is entirely before coronavirus. But when you can just help me understand how you're thinking about both of those pieces?
I'll talk briefly about the EBITDA growth and I'll turn it back over to Mark with some additional color. The one thing I do want to point out and I think we highlighted in our prepared remarks. But just to be clear, in Q4 we did have some items that are unique to 2019 that will not be carried forward. So, in that $453 million of EBITDA in 2019 roughly it's slightly north of $8 million of items that we really got a bump from in Q4. One was a change in certain employee benefits that was about $4 million. In fact, the G&A and also the segment levels, and then there was also a $4 million benefit from refining of the static pool models. So, when you take that step back, you're looking at a base either closes EBITDA that's posted a 4.5 so that for 4.5 grown into the midpoint of the range just shy of 5%, which I think is just shy of 5% of the midpoint in the range of two systems mid-point of the range, excuse me with the contract sales growth. From an overall continuation, I'll turn it back over to Mark to add any color.
Yes, no Jared, you're right with look, we're excited. We're returning back to growth in 2020. We've got a number of new projects, we talked about Cabo and Maui we're not going to be opening on site on those properties this year, but we'll be able to start selling the inventory and so we expect sales are going to ramp throughout the years as inventory comes online we just give you kind of a sense on timing, and maybe it'll be helpful as we think about this sales evolution of a typical project, it can take a full year for property to become available across our entire sales network. So, for instance if we get a project approved for sales, typically it's available and about 20% of our network, you get about six months out, it runs out to about 50%. As we get registrations in the various jurisdictions and then year out we're 100% available out there. So, as we look back when we started '19 and if you look at kind of the inventory, is inventory on the shelf we're at a all time low of inventory on the shelf. Now as we look forward into 2020, we're restocking our inventory on those shelves. So, as we get out through the year, the inventory become more plentiful help us meet a number of upgrade opportunities with our owners and help us also meet some of the new buyer opportunities, so excited about where we're at we spent the good part of two years getting this inventory prepared, and we're excited that it's finally coming about and as far as getting back to double digit growth, I think, you can expect it will be nearing that amount as we move into '21.
Our next questions come from the line of David Katz with Jeffries. Please proceed with your question.
Hi. Good morning everyone. This is still morning. I wanted to sort of take a different tack here and avoid asking more about the near-term virus impact, because there is, as you point out, a refocus on growth. I've thought of HGV in terms of the locations, where it could be over time such as Caribbean or Morse Key et cetera. How should we think about the longer-term opportunities and how long we might have to wait before we'd see you're getting into a little more geographic distribution?
Yeah. Well, we have been expanding, especially from a geographic standpoint. When you think about Cabo and Maui, those are new markets we moved into. Charleston, we just started selling that. We opened up in Chicago. So, we have been expanding and we continue to look for new opportunities. We're looking at some new product forms as well as that and with those new product forms, we think there's an opportunity to really prop up a mid tier opportunity, which we think will broaden our base of customers that we can address today. So, there's been a lot of expansion and we continue to look at new opportunities. We also, I forgot to in my list, we did opened a new property in the Caribbean last year, in Barbados. So, that's the first time we've been in the Caribbean. And then if you look international, we've got a new project under construction in Okinawa. That's a just in time deals that Mori Trust is building on our behalf.
We're excited about our expansion and the opportunities in front of us.
Right. And in terms of how those growth opportunities should roll? Should we think of those more as capital light model or should we expect them to consume capital or really depends.
You're going to see as we think about some of these new opportunities. We're going to be extremely capital efficient. And so, we've got a great mix of fee for service. We're the only ones that have really, I feel perfected a fee for service model that we can do with multiple developers out there at scale. This year we're still looking at 47% to 53% of our mix to be fee-for-service. We expected to drop around 40% to just a little below that in '21. But you can expect is we look at some of these mid tier product that we would probably be looking at a trust format and we'd be looking at one of our partners to help us stand that up.
[Operator Instructions]. There are no further questions at this time. Before we end, I would like to turn the call back over to Mr. Mark Wang for any closing remarks. Mr. Wang?
All right. Well, thanks everyone for joining us this morning. We look forward to speaking with you over the next couple of weeks, and updating you on our next call. Thank you.
This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation and have a great day.