Wyndham CEO: In June 'demand for leisure travel is as strong as it was in 2019'

The travel and tourism industry was heavily impacted by the coronavirus, but it may begin to see a turnaround as consumers look to travel in the coming summer months. Michael Brown, CEO of Wyndham Destinations, joins Yahoo Finance to discuss.

Video Transcript

ALEXIS CHRISTOFOROUS: We know that travel and tourism has been hit pretty hard by the economic downturn. And that is true for every sector of the industry, including timeshares. I want to bring in Michael Brown now. He is the CEO of Wyndham Destinations, which operates 220 vacation clubs and resorts around the world. Michael, good to have you with us. How is business looking for you this quarter now that we have some pockets of the state reopening? What has demand been like?

MICHAEL BROWN: That's a great question. And it's great to finally see that some of the states are beginning to loosen their restrictions. And what we're seeing as far as demand heading into the end of the second quarter, really the month of June, we're seeing demand for leisure travel just as strong as it was in 2019. The bookings that we're seeing from July onwards really resemble exactly what they were in 2019.

But the question remains is, what will happen with COVID-19? What will happen with those restrictions? And we're watching for that. We know the demand will be there. The question is, how will this pandemic unfold?

BRIAN SOZZI: Michael, it's interesting that you brought that up, because we heard from Norwegian Cruise line this week that their bookings for 2021 seem to be pretty strong. Now, hearing what you just said, how do you explain that? We're not just in a normal recession. We're in a pretty severe recession.

MICHAEL BROWN: It's absolutely the case. But when you think of the sector that we're in, you think of a few characteristics. And I could probably ask the two of you is, if you're going to travel, are you going to travel for leisure or for business in the near future? If you're going to travel, will you drive or will you fly? And maybe most importantly, wherever you stay, would you rather stay with a name that you know, a branded company, or one that may be an independent operator?

And I think each of those three elements really describe the space that we're in. And owners-- and every research that we've done, both of our owner base and of general travel and tourism, says that people have a pent-up demand to be on the road, to travel and start enjoying some time away from their house. We just happen to provide exactly the parameters that people want to travel, which is drive-to destinations. In space, our average unit's about 1,000 square feet. So it's exactly how people want to travel, I think, post COVID-19.

ALEXIS CHRISTOFOROUS: You know, something I was actually surprised by is that a Wyndham is going to continue to pay a dividend, even during these trying times. Why did you decide to do that as opposed to holding onto that cash right now?

MICHAEL BROWN: It's a great question, and one we've been getting a lot. And we've put a lot of thought into it. Since we became public in 2018, we've said very consistently this is a very resilient business in good times and in downturns. This is obviously a bigger downturn than we expected. But over 50% of our revenues are recurring and predictable.

And when we did all the steps that you would expect the company to take-- including cutting share buybacks, reducing our capital expenditures, reducing our operating expenditures-- we remain that confident in our cash flow going forward that we not only thought it was the appropriate thing to return capital to shareholders, but we also laid out on our first-quarter call that we expect to be cash flow positive in full year 2020.

BRIAN SOZZI: Michael, amidst all of this, given where the US economy is, have you had any difficulty collecting from your customers?

MICHAEL BROWN: I think the most important part of that, whether it be on the financial side or your associate's side or customers' future vacations, it's all about flexibility. So we've been handling people's financial questions on an individual basis. Of course, you would expect either deferments on their mortgages or their annual maintenance dues. We have seen increases in both of those, but not as much as we had expected. So it's a good sign.

I think the longer this goes on, the bigger risk that becomes. And the idea that going from 42 states that had stay-at-home orders to what we're seeing now with states moving into phase 1, here in Florida we're getting indications they're ready to move into phase two. I think people's mindsets will turn into, if I get to go on my vacation, I'm happy to stay current on my bills.

BRIAN SOZZI: All right, Michael Brown, CEO of Wyndham Destinations. Thanks for taking some time this morning. We'll talk to you soon.

MICHAEL BROWN: Thank you, Brian. Thank you, Alexis.