Wyndham Hotels & Resorts, for full-year 2023, reported systemwide rooms growth of 3.5% year-over-year (YOY), a record high. For the year, global RevPAR grew 5% in constant currency compared to 2022, reflecting a 1% decline in the U.S. and growth of 21% internationally.
“We are tremendously proud to report fourth-quarter results that demonstrate the continued success of our global strategy and our accelerating momentum,” said Geoff Ballotti, president/CEO. “Despite the distraction, uncertainty and misperceptions caused by Choice and their slanted and constant communications to our franchisee base, room openings accelerated and our global development pipeline grew by 10% to an all-time high of 240,000 rooms. Our team opened 27% more rooms than last year in the fourth quarter, and we welcomed 500 new hotels to our system in 2023. This, when combined with our improving franchisee engagement and record retention rate, drove the best organic system growth we’ve ever achieved. We grew comparable adjusted EBITDA by 6% and returned more than a half-billion dollars to our shareholders through dividends and share repurchases. We are confident in the continued effectiveness of our growth strategy and see exceptional value-creation opportunities in the years ahead.”
Highlights include:
- Opened a record 66,000 organic rooms, representing a year-over-year increase of 3%.
- Global retention rate – including all terminations – improved another 30 basis points to a record 95.6%.
- Development pipeline grew 1% sequentially and by 10% YOY to a record 240,000 rooms.
- Grew ECHO Suites pipeline nearly 60% YOY with 98 new contract signings.
- Signed 766 contracts for legacy brands, an increase of 8% YOY.
- Fourth-quarter diluted earnings per share (EPS) of 60 cents and net income of $50 million; adjusted diluted EPS of 91 cents, adjusted net income of $75 million and adjusted EBITDA of $154 million.
- Full-year 2023 diluted EPS of $3.41 and net income of $289 million; adjusted diluted EPS of $4.01, adjusted net income of $341 million and adjusted EBITDA of $659 million.
- Net cash provided by operating activities of $376 million and free cash flow of $339 million for the full year.
System size and development
Wyndham’s global system grew 3.5%, marking 12 consecutive quarters of organic growth and reflecting 1% growth in the U.S. and 7% 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 3% and 13%, respectively. The company also increased its retention rate, which includes all terminations, by another 30 basis points YOY, ending the year at a record 95.6%.
On Dec. 31, 2023, the company’s global development pipeline consisted of more than 1,950 hotels and approximately 240,000 rooms, representing another record-high level and a 10% YOY increase. Key highlights include:
- 14th consecutive quarter of sequential pipeline growth
- 8% growth in the U.S. and 11% internationally
- Approximately 70% of the pipeline is in the midscale and above segments, which grew 6% YOY
- Approximately 58% of the pipeline is international
- Approximately 79% of the pipeline is new construction, of which approximately 34% has broken ground
Wyndham awarded 766 new contracts for its legacy brands in full-year 2023, an increase of 8% compared to full-year 2022. Additionally, the company awarded 98 additional new contracts for its ECHO Suites brand and, as of Dec. 31, 2023, the company had awarded 268 contracts, or more than 33,000 rooms, for the brand.
RevPAR
Fourth-quarter global RevPAR declined 1% in constant currency compared to 2022, reflecting a 4% decline in the U.S. and growth of 7% internationally. For the full year, global RevPAR grew 5% in constant currency compared to 2022 reflecting a 1% decline in the U.S. and growth of 21% internationally.
The company had achieved record-breaking RevPAR in the U.S. during the preceding year due to COVID-impacted travel patterns. Comparing to 2019 to neutralize for COVID-impacted travel patterns, U.S. RevPAR grew 10% in the fourth quarter—a 120 basis point acceleration from third quarter 2023 growth—and 9% for the full year. Internationally, YOY RevPAR growth for both the fourth quarter and the full-year was primarily driven by higher occupancy levels. Compared to 2019, international RevPAR grew in fourth quarter and full-year by 44% and 36%, respectively, on a constant-currency basis.
Operating Results
Fourth-quarter 2023
Fee-related and other revenues was $320 million compared to $310 million in fourth quarter 2022 reflecting global net room growth as well as higher license and ancillary fees.
The company generated net income of $50 million compared to $56 million in fourth quarter 2022. The decrease was reflective of a higher effective tax rate, higher interest expense, foreign currency impact from hyper inflation in Argentina and transaction-related expenses resulting from the unsolicited offer by Choice Hotels, partially offset by higher adjusted EBITDA.
Adjusted EBITDA grew 22% to $154 million from $126 million. This increase included a $21 million favorable impact from marketing fund variability, excluding which adjusted EBITDA grew 6% primarily reflecting higher fee-related and other revenues.
Diluted earnings per share was 60 cents compared to 63 cents in fourth quarter 2022. This decrease reflects lower net income, partially offset by the benefit of a lower share count due to share repurchase activity.
Adjusted diluted EPS grew 26% to 91 cents per share from 72 cents per share. This increase included 19 cents per share related to the favorable marketing fund variability (after estimated taxes), excluding which adjusted diluted EPS was unchanged YOY as adjusted EBITDA growth and the benefit from share repurchase activity was substantially offset by higher interest expense.
During the period, the company’s marketing fund revenues exceeded expenses by $9 million; while in fourth-quarter 2022, the marketing fund expenses exceeded revenues by $12 million, resulting in $21 million of marketing fund variability.
Full-year 2023
Fee-related and other revenues was $1.384 billion compared to $1.354 billion in full-year 2022, which included $50 million from the company’s select-service management business and owned hotels, which were exited in 2022. On a comparable basis, fee-related and other revenues increased 6% YOY primarily reflecting global RevPAR and net room growth, higher license and ancillary fees and pass-through revenues associated with the company’s global franchisee conference in September, which was held for the first time since 2019.
The company generated net income of $289 million compared to $355 million in full-year 2022, which included $37 million from the select-service managed and owned hotels. The decrease was reflective of a higher effective tax rate, higher interest expense, foreign currency impact from hyper inflation in Argentina and transaction-related expenses resulting from the unsolicited offer by Choice Hotels, partially offset by higher adjusted EBITDA.
Adjusted EBITDA was $659 million compared to $650 million in full-year 2022, which included $18 million from the select-service managed and owned hotels. The growth in adjusted EBITDA was further impacted by $11 million of unfavorable marketing fund variability. On a comparable basis, adjusted EBITDA increased 6% reflecting higher fee-related and other revenues.
Diluted EPS was $3.41 compared to $3.91 in full-year 2022, which included 40 cents per share from the select-service managed and owned hotels. This decrease reflects the lower net income, partially offset by the benefit of a lower share count due to share repurchase activity.
Adjusted diluted EPS was $4.01 per share compared to $3.96 per share in full-year 2022, which included 15 cents per share from the select-service managed and owned hotels. This growth in adjusted diluted EPS was further impacted by 9 cents per share (after estimated taxes) of unfavorable marketing fund variability. On a comparable basis, adjusted diluted EPS increased 8% YOY reflecting the adjusted EBITDA growth and the benefit from share repurchase activity, partially offset by higher interest expense.
During the year, the company’s marketing fund revenues exceeded expenses by $9 million; while in 2022, the marketing fund revenues exceeded expenses by $20 million, resulting in $11 million of marketing fund variability.
Full-year 2024 outlook
The company provided the following outlook for full-year 2024:
- YOY rooms growth between 3% and 4%
- YOY global RevPAR growth between 2% and 3%
- Adjusted EBITDA between $690 million and $700 million
- Adjusted net income between $341 million and $351 million
- Adjusted diluted EPS between $4.11 and $4.23
