Wyndham Hotels & Resorts revealed results for the three months and year ended Dec. 31, 2021, including the largest pipeline in the company’s history. During a conference call about the results, President/CEO Geoffrey A. Ballotti said that the company will be launching its first economy extended-stay brand this spring.
“[It’s] a brand we have been designing over the past year in consultation with several of the industry’s most experienced extended-stay developers,” he said. “We are very excited about the prospects for this new brand, and we look forward to sharing more about it in the months ahead.”
Highlights from the fourth-quarter and year-end 2021 report:
- U.S. RevPAR for the quarter exceeded 2019 levels by 9%, growing 58% versus 2020.
- Systemwide rooms grew 180 basis points year-over-year, including 70 basis points of growth in the U.S. and 350 basis points of growth internationally.
- Diluted earnings per share for the quarter of $0.52 and net income of $48 million; diluted EPS for the full year of $2.60 and net income of $244 million.
- Adjusted diluted earnings per share of $0.69 for the quarter and adjusted net income of $64 million; adjusted earnings per share for the full year of $3.16 and adjusted net income of $297 million.
- Adjusted EBITDA of $131 million for the quarter and $590 million for the full year.
- Net cash provided by operating activities for the full year of $426 million and free cash flow of $389 million.
- Returned more than $190 million to shareholders for the full year through share repurchases and dividends.
“With a 9% U.S. RevPAR increase and another 340 basis points of domestic market-share gains versus 2019, we were very pleased with our performance this quarter as each month saw stronger growth than the month prior,” said Ballotti. “New COVID variants did not impact our domestic, drive-to leisure travel business and consumer demand portends a very busy Spring Break for our franchisees. We enter 2022 with strong occupancy trends in the U.S., our largest-ever development pipeline and a multitude of new technology services and marketing programs to enhance our franchisees’ top and bottom lines. In addition, our board authorized a quarterly dividend of $0.32 per share and increased our share repurchase authorization, which reflects the ongoing strength of the business and our strong free cash flow.”
Q4 operating results
Fee-related and other revenues increased 43% to $314 million primarily reflecting strong ADR growth in the U.S., which drove fourth-quarter U.S. RevPAR 9% above 2019 levels. The company generated net income of $48 million, or $0.52 per diluted share, an increase of $55 million, or $0.60 per diluted share, reflecting an increase in adjusted EBITDA and lower net interest expense. Adjusted EBITDA for the quarter was $131 million, an increase of 126% versus 2020. The increase of $73 million reflects the increase in fee-related and other revenues and lower excess marketing spend, partially offset by higher volume-related expenses due to the ongoing recovery in travel demand.
During fourth-quarter 2021, the company’s marketing fund expenses exceeded revenues by $8 million; while in fourth-quarter 2020, the company’s marketing fund expenses exceeded revenues by $26 million.
The company’s global system grew 180 basis points, reflecting 70 basis points of growth in the U.S. and 350 basis points of 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 5% and 15%, respectively. Fourth-quarter room openings recovered to 97% of 2019 levels globally reflecting a 21% increase in domestic additions. The company also achieved its goal of a 95% retention rate for the full year 2021.
Global and international RevPAR began to lap the onset of the COVID-19 pandemic in January 2021, while the U.S. began to lap its onset in March 2021. As such, comparisons to 2019 (on a two-year, constant currency basis) are more meaningful when evaluating trends. On this basis, fourth-quarter RevPAR in the U.S. exceeded 2019 levels by 9% while international RevPAR declined 19%. Global RevPAR recovered to 100% of 2019 levels. The 9% increase in the U.S. is primarily due to pricing power where ADR exceeded 2019 levels by 8%. The 19% international decline demonstrates sequential progress from a 25% decline in third quarter.
Hotel franchising revenues increased 34% year-over-year (YOY) to $270 million primarily due to the global RevPAR increase. Hotel franchising adjusted EBITDA increased 66% to $128 million reflecting the growth in revenues and lower excess marketing spend, partially offset by higher volume-related expenses.
Hotel management revenues increased 30% YOY to $122 million, including a $2 million increase in cost-reimbursement revenues, which have no impact on adjusted EBITDA. Absent cost-reimbursements, hotel management revenues increased $26 million, or 144%, to $44 million primarily due to the global RevPAR increase, as well as improved performance at the company’s owned hotels. Hotel management adjusted EBITDA increased $20 million YOY reflecting the revenue increases, partially offset by higher volume-related expenses.
Full-year 2021 operating results
Fee-related and other revenues increased 31% to $1.245 billion primarily reflecting the recovery in travel demand and its impact on global RevPAR, as well as 2% growth in the company’s global system size. Global RevPAR recovered to 88% of 2019 levels on a constant currency basis, including domestic RevPAR at 97% of 2019 levels.
The company generated net income of $244 million, or $2.60 per diluted share, compared to net loss of $132 million, or $1.42 loss per diluted share, for the full-year 2020. Adjusted EBITDA for the full year was $590 million, an increase of 76% versus 2020. The increase of $254 million in adjusted EBITDA primarily reflects the increase in fee-related and other revenues and marketing fund favorability, partially offset by higher volume-related expenses due to the recovery in travel demand throughout the year. The increase of $376 million, or $4.02 per diluted share, in net income reflects a further decline in after-tax special-item charges and lower net interest expense.
During full-year 2021, the company’s marketing fund revenues exceeded expenses by $18 million; while in full-year 2020, the company’s marketing fund expenses exceeded revenues by $49 million.
The company awarded 655 new contracts this year. On Dec. 31, 2021, the company’s global development pipeline consisted of more than 1,500 hotels and more than 194,000 rooms, the highest level on record. The pipeline grew 5% YOY, including 3% domestically and 6% internationally. Approximately 65% of the company’s development pipeline is international and 79% is new construction, of which approximately 35% has broken ground. More than 80% of the global development pipeline is in the midscale and above segments including more than 70% in the U.S.
Potential sale of owned hotels
During the fourth quarter of 2021, the company decided to pursue the sale of its two owned hotels. As of Dec. 31, 2021, the assets and liabilities of these owned hotels were reported in assets held for sale and liabilities held for sale on the consolidated balance sheet. As a result of the plan to sell these owned hotels, in the fourth quarter of 2021, the company recorded a non-cash impairment charge of $6 million to reflect the expected value upon potential sale.