Wyndham Hotels & Resorts reported strong results for the fourth quarter and end of the year for 2022, including a 12% year-over-year pipeline increase.
Highlights include:
- Global RevPAR grew 15% compared to fourth-quarter 2021 in constant currency, a 300-basis point improvement sequentially, representing 116% of 2019 levels; full-year global RevPAR grew 20% year-over-year in constant currency.
- U.S. RevPAR grew 5% compared to fourth-quarter 2021, a 300-basis point improvement sequentially, representing 115% of 2019 levels; full-year U.S. RevPAR grew 12%.
- System-wide rooms grew 4% year-over-year, including 1% in the U.S. and 9% internationally.
- Development pipeline grew 12% year-over-year, including 170 new construction projects added for the company’s ECHO Suites Extended Stay by Wyndham brand since launch in March.
- Hotel franchising segment revenues grew 12% compared to fourth-quarter 2021 and 16% for the full year.
- Adjusted EBITDA of $126 million for the quarter and $650 million for the full-year, which exceeded our full-year outlook of $636 million to $644 million.
“We are incredibly proud of our team’s ability to close out 2022 with RevPAR and adjusted EBITDA results that exceeded our outlook,” said Geoffrey A. Ballotti, president/CEO, Wyndham. “Our development pipeline increased sequentially for the 10th consecutive quarter reflecting robust developer interest in our brands for both conversion and new construction opportunities despite the broader macro-economic climate. Given the continued occupancy recovery across the globe and infrastructure business growth in 2023, we are enthusiastic about the opportunities that lie ahead and our ability to deliver outstanding value to our shareholders, guests, franchisees and team members.”
Q4 operating results
Fee-related and other revenues was $310 million compared to $314 million in fourth-quarter 2021, which included $38 million from the company’s select-service management business and owned hotels—both of which were exited in the first half of 2022. On a comparable basis, fee-related and other revenues increased 12% year-over-year primarily reflecting global RevPAR growth and higher license fees.
The company generated net income of $56 million, or $0.63 per diluted share, compared to $48 million, or $0.52 per diluted share, in fourth-quarter 2021. The increase in net income was primarily due to higher adjusted EBITDA in the company’s hotel franchising segment, partially offset by the impact from the exit of the company’s select-service management business and owned hotels. Adjusted EBITDA was $126 million compared to $131 million in fourth-quarter 2021, which included a $12 million contribution from the company’s select-service management business and owned hotels—both of which were exited in the first half of 2022. On a comparable basis, adjusted EBITDA increased 6% year-over-year reflecting higher fee-related and other revenues, partially offset by an unfavorable timing impact from the marketing fund and the inflationary impact on expenses, both of which were anticipated.
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 4% and 10%, respectively, as well as 80 basis points of growth globally and 200 basis points internationally from the acquisition of the Vienna House brand in September 2022. The company also achieved its goal of a retention rate above 95% for the full-year 2022.
Fourth quarter global RevPAR grew by 15% in constant currency compared to 2021 reflecting 5% growth in the U.S. and 46% internationally. Global RevPAR was 116% of 2019 levels in constant currency, with the U.S. at 115% and international at 123%. The increases compared to both 2021 and 2019 were driven primarily by stronger pricing power.
Hotel franchising revenues increased 12% year-over-year to $303 million primarily due to the global RevPAR increase and higher license fees. Hotel franchising adjusted EBITDA of $138 million increased 8% reflecting the growth in revenues, partially offset by the expected unfavorable timing impact from the marketing fund, excluding which Hotel franchising adjusted EBITDA would have increased 13%.
Hotel management revenues decreased 75% year-over-year to $31 million, including a $54 million decrease in cost-reimbursement revenues, which have no impact on adjusted EBITDA. Absent cost reimbursements, hotel management revenues decreased $37 million, or 84%, and adjusted EBITDA decreased $15 million, or 79%, reflecting the exit of the company’s select-service management business and owned hotels.
Full-year 2022 operating results
Fee-related and other revenues was $1.4 billion compared to $1.2 billion in full-year 2021. The company’s select-service management business and owned hotels—both of which were exited in the first half of 2022—contributed $50 million and $125 million during 2022 and 2021, respectively. On a comparable basis, fee-related and other revenues increased 16% year-over-year primarily reflecting global RevPAR growth and higher license fees.
The company generated net income of $355 million, or $3.91 per diluted share, compared to $244 million, or $2.60 per diluted share, in full-year 2021. The increase in net income was primarily due to higher adjusted EBITDA in the company’s hotel franchising segment and lower net interest expense, partially offset by the impact from the exit of the company’s select-service management business and owned hotels. Adjusted EBITDA was $650 million compared to $590 million in full-year 2021. The company’s select-service management business and owned hotels—both of which were exited in the first half of 2022—contributed $18 million and $37 million during 2022 and 2021, respectively. On a comparable basis, adjusted EBITDA increased 14% year-over-year reflecting higher fee-related and other revenues, partially offset by the inflationary impact on expenses.
During full-year 2020, the company’s marketing fund expenses exceeded revenues by $49 million in order to support its owners during COVID. During the full-year 2022, the company’s marketing fund revenues exceeded expenses by $20 million; while in full-year 2021, the company’s marketing fund revenues exceeded expenses by $18 million. As such, the company has now recovered $38 million of the $49 million of support provided during 2020.
Development
The company awarded 882 new contracts this year, a 35% increase compared to the 655 contracts awarded during 2021.
At the end of the year the company’s global development pipeline consisted of more than 1,700 hotels and approximately 219,000 rooms, of which approximately 73% is in the midscale and above segments (56% in the U.S.). The pipeline grew 12% year-over-year, including 34% growth in the U.S.
Approximately 60% of the company’s development pipeline is international and over 80% is new construction, of which approximately 36% has broken ground. The pipeline includes 170 new contracts awarded for the company’s ECHO Suites Extended Stay by Wyndham brand since its launch in March 2022. In line with development expectations, the first three ECHO Suites hotels broke ground in 2022 and are anticipated to open in the second half of 2023.
