Wyndham reports Q2 RevPAR increase of 23% YOY

Wyndham Hotels & Resorts, for the second quarter ended June 30, reported global RevPAR of $44.28, a 23% increase over the same period last year, ​​including 15% growth in the U.S. and 59% growth internationally. The increase is approximately 80% driven by stronger pricing power and 20% driven by higher occupancy levels.

“We kicked off our high-demand summer season with the strongest Memorial Day we’ve ever experienced, as guests traveled further, stayed longer and spent more at our hotels than they did pre-pandemic,” said Geoffrey A. Ballotti, president/CEO. “Our business experienced another strong quarter performing above both last year and 2019 as international recovery accelerated and our development teams grew our pipeline to a record level. Our second-quarter results once again demonstrated the strength and durability of our business model, and we are well on track to deliver on our 2022 commitments.”

Among the highlights:

  • Systemwide rooms grew 3% year-over-year (YOY), including 2% of growth in the U.S. and 4% of growth internationally.
  • Hotel Franchising segment revenues grew 18% YOY.
  • Diluted earnings per share (EPS) of $1.00 and adjusted diluted EPS of $1.07.
  • Net income of $92 million and adjusted net income of $99 million.
  • Adjusted EBITDA of $175 million.
  • Year-to-date net cash provided by operating activities of $242 million and free cash flow of $224 million.
  • Domestic development signings increased 77%, including 22 new-construction projects for the company’s new extended-stay brand, bringing the total number to 72 since launch in March.
  • Completed the sale of the Wyndham Grand Rio Mar Resort.

Fee-related and other revenues increased 10% year-over-year to $354 million as the impact from the increase of global RevPAR and higher license fees were partially offset by a $21 million impact from the sale of the company’s owned hotels and the exit of its select-service management business.

Wyndham generated net income of $92 million, or $1.00 per diluted share, an increase of $24 million, or $0.27 per diluted share, reflecting higher adjusted EBITDA, lower depreciation and amortization expense due to the sale of the company’s owned hotels and lower expenses associated with the early extinguishment of debt. Adjusted EBITDA increased $7 million, or 4%, versus 2021 to $175 million reflecting the revenue growth, which was partially offset by an $8 million impact from the sale of the company’s owned hotels and the exit of its select-service management business as well as a $2 million unfavorable timing impact from the marketing fund.

System size
Wyndham’s global system grew 3% to 818,900 rooms, reflecting 2% growth in the U.S. (492,400 rooms) and 4% growth internationally (326,500 rooms). 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 7% and 12%, respectively. The company remains solidly on track with its goal of achieving a retention rate above 95% and its net room growth outlook of 2% to 4% for full-year 2022.

Business segment discussion
Hotel Franchising revenues increased 18% YOY to $335 million primarily due to the global RevPAR increase and higher license and other fees. Hotel Franchising adjusted EBITDA increased 11% to $185 million reflecting the growth in revenues, partially offset by a 340 basis point unfavorable timing impact from the marketing fund.

Hotel Management revenues decreased 59% YOY to $51 million, including a $53 million decrease in cost-reimbursement revenues, which have no impact on adjusted EBITDA. Absent cost-reimbursements, Hotel Management revenues decreased $19 million, or 50%, to $19 million due to the sale of the company’s owned hotels and the exit of its select-service management business. Hotel Management adjusted EBITDA decreased $10 million year-over-year reflecting the same.

Wyndham awarded 187 new contracts this quarter compared to 154 in Q2 2021. On June 30, the company’s global development pipeline consisted of approximately 1,600 hotels and approximately 208,000 rooms, of which approximately 80% is in the midscale and above segments (nearly 70% in the U.S.). The pipeline grew 9% YOY, including 17% domestically and 5% internationally. Approximately 62% of the company’s development pipeline is international and 78% is new construction, of which approximately 36% has broken ground.

Sale of owned hotel
On May 24, the company completed the sale of the Wyndham Grand Rio Mar Resort in Puerto Rico for gross proceeds of approximately $62 million. There was no gain or loss on the sale as the proceeds approximated adjusted net book value. Wyndham entered into a 20-year franchise agreement with the buyer.

Cash and liquidity
The company generated $242 million of net cash provided by operating activities year-to-date and $224 million of free cash flow. It ended the quarter with a cash balance of $400 million and approximately $1.1 billion in total liquidity.

Full-year 2022 outlook
Wyndham is increasing its outlook as follows to reflect future projections related to the company’s license fees from Travel & Leisure based on their full-year 2022 Gross VOI Sales outlook provided on April 28 as well as the impact of second-quarter share repurchase activity.

Changes to the outlook include fee-related and other revenues to a range of $1.29 billion-$1.32 billion; adjusted EBITDA of $611 million-$631 million; adjusted net income of $323 million-$334 million; and adjusted diluted EPS of $3.51-$3.63.