Wyndham Hotels & Resorts, for the three months ended Sept. 30, reported global RevPAR growth of 12% compared to the same period last year. U.S. RevPAR grew 2% compared to the third-quarter 2021 and represents 110% of 2019 levels.
“With our brands delivering record U.S. RevPAR and our global development teams driving net unit growth towards the top end of our initial guidance, we are raising our full-year 2022 outlook,” said Geoff Ballotti, president/CEO. “Despite the broader macro-economic climate, we are confident in the continued resiliency of our franchise model as we continue to invest in the business and generate substantial shareholder returns. This quarter, we grew our development pipeline by 10%, surpassed our full-year development goal for our new extended-stay brand and completed the acquisition of our 23rd brand, Vienna House. We remain committed to a disciplined capital allocation strategy that will deliver outstanding value to our shareholders, guests, franchisees and team members in any environment.”
Q3 highlights:
- System-wide rooms grew 4% YOY (YOY), including 1% of growth in the U.S. and 9% of growth internationally.
- Development pipeline grew 10% YOY to 212,000 rooms and U.S. development signings increased 82%, including 48 new-construction projects for the company’s new extended-stay brand, bringing the total number to 120 since launch in March.
- Hotel Franchising segment revenues grew 9% YOY.
- Diluted earnings per share (EPS) of $1.13 and adjusted diluted EPS of $1.21; net income of $101 million and adjusted net income of $108 million.
- Adjusted EBITDA of $191 million.
- Year-to-date net cash provided by operating activities of $349 million and free cash flow of $321 million.
- Returned $161 million to shareholders through $132 million of share repurchases and a quarterly cash dividend of $0.32 per share.
Fee-related and other revenues was $375 million compared to $377 million in Q3 2021, which included $34 million from the company’s select-service management business and owned hotels—both of which were exited in the first half of this year. On a comparable basis, fee-related and other revenues increased 9% YOY reflecting global constant currency RevPAR growth of 12% and higher license fees.
Wyndham generated net income of $101 million, or $1.13 per diluted share, compared to $103 million, or $1.09 per diluted share, in Q3 2021. The decline in net income was primarily due to the exit of the company’s select-service management business and owned hotels, partially offset by higher adjusted EBITDA in its hotel franchising segment. Adjusted EBITDA was $191 million compared to $194 million in Q3 2021, which included a $10 million contribution from the company’s select-service management business and owned hotels—both of which were exited in the first half of this year. On a comparable basis, adjusted EBITDA increased 4% YOY reflecting higher fee-related and other revenues, partially offset by a 600-basis-point unfavorable timing impact from the marketing fund.
System size
The company’s global system grew 4%, reflecting 1% growth in the U.S. and 9% growth internationally. As expected, these increases included strong growth in both the higher RevPAR midscale and above segments in the U.S. and the direct franchising business in China, which grew 6% and 8%, respectively, as well as 80 basis points of growth globally and 200 basis points internationally from the acquisition of the Vienna House brand.
RevPAR
Third-quarter global RevPAR grew by 12% in constant currency compared to 2021 as the U.S. grew 2% and international grew 46%. Global RevPAR was 111% of 2019 levels in constant currency, with the U.S. at 110% and international at 117%. The increases compared to both 2021 and 2019 were driven primarily by stronger pricing power.
Business segment discussion
Hotel Franchising revenues increased 9% YOY to $367 million primarily due to the global RevPAR increase and higher license fees. Hotel Franchising adjusted EBITDA of $201 million increased 4% reflecting the growth in revenues, partially offset by an unfavorable timing impact from the marketing fund, excluding which Hotel Franchising adjusted EBITDA would have increased 12%.
Hotel Management revenues decreased 68% YOY to $40 million, including a $54 million decrease in cost-reimbursement revenues, which have no impact on adjusted EBITDA. Absent cost reimbursements, Hotel Management revenues decreased $32 million, or 80%, and adjusted EBITDA decreased $9 million reflecting the exit of the company’s select-service management business and owned hotels.
During the third quarter, Wyndham’s marketing fund revenues exceeded expenses by $12 million; while in Q3 2021, its marketing fund revenues exceeded expenses by $19 million.
Development
Wyndham awarded 214 new contracts this quarter compared to 151 in Q3 2021. On Sept. 30, the company’s global development pipeline consisted of more than 1,600 hotels and more than 212,000 rooms, of which approximately 76% is in the midscale and above segments (61% in the U.S.). The pipeline grew 10% YOY—24% in the U.S. and 2% internationally. Approximately 60% of the company’s development pipeline is international and 80% is new construction, of which approximately 36% has broken ground. The pipeline includes 120 new contracts awarded for Wyndham’s new extended-stay brand since its launch in March.
Acquisition of Vienna House
On Sept. 8, Wyndham completed the acquisition of the Vienna House brand, adding an upscale and midscale portfolio of over 40 hotels and more than 6,400 rooms to its existing footprint in the EMEA region. The purchase price was $44 million.
Cash and liquidity
The company generated year-to-date net cash provided by operating activities of $349 million and free cash flow of $321 million. It ended the quarter with a cash balance of $286 million and approximately $1.0 billion in total liquidity.
Full-Year 2022 Outlook
The company updated its outlook as follows:
- YOY rooms growth: ~4% (was 2% – 4%)
- YOY global RevPAR growth: 14 – 16% (was 12% – 16%)
- Fee-related and other revenues: $1.33 – $1.34 billion (was $1.29 – $1.32 billion)
- Adjusted EBITDA: $636 – $644 million (was $611 – $631 million)
- Adjusted net income: $349 – $354 million (was: $323 – $334 million)
- Adjusted diluted EPS: $3.84 – $3.89 (was $3.51 – $3.63)
