Travel + Leisure Co (TNL) Risk Analysis

Under the separation agreement and the tax sharing agreement that we executed with Cendant Corporation (now Avis Budget Group, Inc., "ABG") and former ABG units, Realogy (now Anywhere Real Estate Inc.) and Travelport. Wyndham Worldwide and Anywhere Real Estate Inc. generally were responsible for 37.5% and 62.5% of certain of ABG's contingent and other corporate liabilities and associated costs, including certain contingent and other corporate liabilities of ABG or its subsidiaries to the extent incurred on or prior to August 23, 2006. As a result of the completion of the Spin-off, Wyndham Hotels agreed to retain one-third of ABG's contingent and other corporate liabilities and associated costs; therefore, we are responsible for 25% of these liabilities and costs subsequent to the Spin-off. These liabilities include those relating to certain of ABG's terminated or divested businesses, including the sale of the North American and European vacation rentals businesses, the Travelport sale, certain ABG-related litigation, actions with respect to the separation plan and payments under certain contracts that were not allocated to any specific party in connection with the separation. If any party responsible for the liabilities described above were to default on its obligations, the non-defaulting parties would be required to pay the amounts in default. Accordingly, we could under certain circumstances be obligated to pay amounts in excess of our share of the assumed obligations related to such liabilities, including associated costs.

Many factors influence our reputation and the value of our brands, including the perceptions held by our customers, other key stakeholders and the communities in which we do business related to our environmental, social and governance activities. The public holds diverse and often conflicting views on these matters, and customer, government and other stakeholder perceptions of our environmental, social and governance initiatives may differ widely. If we do not successfully manage expectations across these varied stakeholder interests, it could erode stakeholder trust, harm our reputation and the value of our brands, constrain our investment opportunities, and damage our ability to compete effectively and grow and operate our business. At the same time, our reputation and the value of our brands may be damaged if we fail to act responsibly or comply with regulatory requirements in a number of areas, such as business ethics and compliance, safety and security, responsible tourism, public health, environmental stewardship and sustainability, supply chain management, climate change, human rights and modern slavery, philanthropy, employee relations, and support for local communities. We have publicly stated our goals related to environmental sustainability, which include reducing our water intensity and GHG emissions (Scope 1 + Scope 2) and increasing our renewable energy consumption at our owned, managed, and leased assets. In part, we must work through applicable property owners' associations that we do not control to achieve these goals. We may also take additional actions related to climate change and environmental sustainability voluntarily or in response to increased regulations in the future that would materially increase the costs to develop and operate our resorts, which could have an adverse impact on our profitability even though such actions may be necessary to increase the long-term sustainability of our business. We also must continue to develop appropriate internal and disclosure controls designed such that our disclosed achievements against our environmental goals are accurately reported. Current and future international operations expose us to additional challenges and risks that may not be inherent in operating solely in the U.S. due to different social or cultural norms and practices that are not customary in the U.S., geographical distance and language barriers, including our ability to sell products and services, enforce intellectual property rights and staff and manage operations.

Our travel club businesses have not grown as quickly as originally anticipated and as we continue to operate and seek to expand our business in the broader leisure travel industry, we will be adversely impacted if we cannot compete effectively. There are a great number of existing competitive travel services, some of which have significantly greater financial, marketing, and other resources than we have, and while the market is currently fragmented, existing travel service companies as well as new entrants may adversely impact our ability to achieve the level of revenues, transactions, and profitability we expect. Our B2B white label travel clubs business is largely dependent on the success of marketing efforts to closed user groups through partner brands and the subsequent propensity of the members of those groups to use the platform for their travel bookings and upgrade to receive premium services. Our travel clubs businesses are also reliant on our ability to leverage new and existing relationships with travel suppliers, including hotels, airlines, rental car companies, and wholesale suppliers, and their willingness to distribute products and services through our platforms. This business is also impacted by third-party internet travel intermediaries and peer-to-peer online networks that may be used by consumers to search for, book and rent their resort and other travel accommodations. Our success in these leisure travel clubs is also dependent upon our ability to efficiently customize our travel offerings to particular areas of interest and focus on the groups to which we market and promote our services and offerings. Our success here is also dependent upon our ongoing ability to successfully adjust and restructure our business models, including seeking to lower our costs, which we have been undertaking to meet changing conditions and customer requirements compared to those we had originally anticipated and planned for. There is no assurance that these efforts will be successful within the timeframe or at the levels we expect, or at all. Our travel clubs businesses have required us to utilize and augment human capital and other resources in a manner different from those required by our historical business offerings and, as a result, subject us to greater risks and uncertainties than historically considered for our core timeshare and exchange businesses.

We are subject to numerous business, financial, operating and other risks common to the timeshare industry and the leisure travel industry more broadly, such as adverse changes with respect to any of the following: - consumer travel and vacation patterns and consumer preferences;- increased or unanticipated operating costs, including as a result of recent inflationary pressures, and which may not be offset on a timely basis, or at all, by our ability or actions to increase our product pricing or maintenance fees;- increased energy costs, labor shortages and increased labor costs as well as increases in minimum wage and health-care related costs, which may not be fully offset by price or fee increases in our business or otherwise;- product and supply chain disruptions;- desirability or continued desirability of geographic regions where resorts in or affiliated with our businesses are located;- the supply and demand for exchange services and products, and travel subscription services and products;- our ability to accurately plan for, predict, and satisfy future timeshare inventory needs, including through development of new properties, and optimally manage the amount of developer owned inventory we hold for sale, which has been and may in the future be adversely impacted by events and occurrences that affect vacation ownership tours and VOI sales, such as COVID-19 or other pandemics or health-related concerns;- our ability to continue to attract customers for VOI purchases and upgrades at the levels we expect;- our ability to operate our managed resorts and to conduct tours of our properties at the levels we have in the past;- seasonality in our businesses, which may cause fluctuations in our operating results;- the availability of acceptable financing and the cost of capital as they apply to us, our customers, our RCI affiliates and other developers of vacation ownership resorts and timeshare property owner associations;- the quality of the services provided by affiliated resorts and properties in our exchange business or resorts in which we sell VOIs or by participants in the Wyndham Rewards loyalty program, which may adversely affect our image, reputation and brand value;- success of any actions we may take to increase our exchange membership levels;- our ability to develop and maintain relationships with marketing partners, including our Blue Thread marketing relationship with Wyndham Hotels;- market perception of the timeshare industry and our ability to effectively respond to any reputational or brand issues that may arise from negative publicity from social media postings or media reports, which could damage our brands;- our ability to develop and maintain positive relations and contractual arrangements with VOI owners, current and potential vacation exchange members, resorts with units that are exchanged through our exchange business and timeshare property owner associations;- organized labor activities and associated litigation;- adverse economic factors impacting the financial health of customers, which has impaired and could continue to impair our ability to collect outstanding fees or other amounts due or otherwise exercise our contractual rights;- our effectiveness in keeping pace with technological developments as well as any failure to timely upgrade our technology infrastructure and efficiently manage upgrade projects to achieve our strategic planning expectations and to meet changing customer preferences and customer interfacing needs;- our effectiveness with positive messaging, through social media platforms, our brand and our timeshare resorts and those resorts with which our exchange members may exchange vacation interests, and our ability to effectively respond to any negative messaging or comments on social media;- our ability to effectively use data to achieve market intelligence and develop, manage and grow our core operations and strategic initiatives using such data and market intelligence;- our ability to offer acceptable customer pricing for products and services, including in a time of economic uncertainty and higher borrowing costs;- our ability to identify, obtain, train and retain industry specific talent (including digital, sales, marketing, and operational leadership skills) to execute our growth strategy and to address customer satisfaction;- disruptions, including non-renewal or termination of agreements, in relationships with third parties (including marketing alliances, loyalty programs and other affiliations with third parties, including Wyndham Hotels);- owners or other developers that have advance notes with us, or who have received loans or other financial arrangements incentives from us, who have experienced and may continue to experience financial difficulties;- a decrease in the supply of available exchange accommodations due to, among other reasons, a decrease in inventory included in the system (including as a result of extreme weather events such as have occurred in our geographic markets in recent years, ongoing property renovations or a decrease in member deposits) which could adversely affect our exchange business;- the viability of property owners' associations and the maintenance and refurbishment of vacation ownership properties that we manage, which depend on property owners' associations levying sufficient maintenance fees and the ability of members to pay such maintenance fees, particularly in times of economic downturn;- decrease in or delays or cancellations of planned or future development or refurbishment projects, whether due to budgetary constraints of property owners' associations or otherwise, and the complexity with regard to removing properties from timeshare regimes when they can no longer be sustainably maintained;- increases in maintenance fees, which could cause our product to become less attractive or less competitive;- the level of unlawful or deceptive third-party VOI resale schemes, which could damage our reputation and brand value;- the cost to develop vacation ownership properties and difficulties associated with obtaining required approvals in connection with development, liability under state and local laws with respect to any construction defects in the vacation ownership properties we develop, and risks related to real estate project development costs and completion;- private resale of VOIs and the sale of VOIs on the secondary market, which could adversely affect our vacation ownership resorts, the prices at which we sell VOIs, and our exchange business;- disputes with owners of VOIs, property owners' associations, and vacation exchange affiliation partners, which may result in litigation and the loss of management contracts;- laws, regulations and legislation internationally and domestically, and on a federal, state or local level, concerning the leisure travel industry, which may make the operation of our business more onerous, more expensive or less profitable;- our failure or inability to adequately protect and maintain our trademarks and other intellectual property rights; and - consumers increased use of third-party internet travel intermediaries and peer-to-peer online networks to search for and book their lodging accommodations, which could adversely affect our vacation ownership and vacation exchange brands, travel clubs and travel subscription businesses, reservation systems, bookings and rates. Any of these factors could increase our costs, reduce our revenues and profitability and otherwise adversely impact our opportunities for growth.