Wyndham Hotels & Resorts marked five years in June since its spinoff from Wyndham Destinations as a private company, and in that time, the brand has grown its global portfolio by 7.5% to 851,500 rooms.
Wyndham also has the most rooms ever in its development pipeline — approximately 228,000 as of the end of the second quarter. If all of those rooms opened today, Wyndham's system size would exceed the 1 million rooms mark by 79,500.
Nearly 18,000 rooms opened globally in the second quarter, up 23% year over year and 10% compared to 2019.
"Year to date through June 30, we've opened 198 hotels — opening more than one hotel each and every day," Wyndham President and CEO Geoff Ballotti said.
Wyndham's development pipeline grew 10% year over year globally and 22% just in the U.S. It marked the 12th consecutive quarter of global pipeline growth.
In the second quarter, the lion's share of that growth occurred outside of the U.S. Global system size grew 4% year over year, driven by 9% growth internationally, compared to 1% growth in the U.S. Its direct franchise business in China is a big reason for that, growing 13% in the second quarter; and its September 2022 acquisition of European brand Vienna House also contributed.
Openings outside the U.S. during the quarter included six hotels in Southeast Asia, including the 1,400-room Wyndham Grand Phu Quoc in Vietnam. Ten new-build hotels and 30 conversions opened in China.
Also driving growth for Wyndham in the second quarter were signings for its extended-stay brand Echo Suites. The company awarded 60 new-construction contracts for the brand in July, including its first hotels in Canada, which brings the total number of hotels in development to 265, representing approximately 33,000 rooms.
In all, the company signed contracts for 24,000 rooms in the quarter, up 6% year over year and up 7% compared to the same period in 2019. Contracts awarded in the quarter totaled 179, up 8% year over year.
Wyndham has projected net room growth for full-year 2023 of 2% to 4% and is on track to meet that goal.
Ballotti said strong leisure travel trends, as well as recent economic data, give the company confidence about its "growth prospects in the quarters and years ahead."
"June's Consumer Confidence Index increased seven points ... while at the same time, U.S. unemployment remains at its lowest level since the 1960s," Ballotti said. "Our middle-class guests with average household incomes of over $90,000, nearly 30% above the U.S. median, have seen wage and savings growth of approximately 20% and nearly 30% respectively since 2019. And with their wage growth outpacing the rate of inflation since the start of 2019, they continue to allocate a higher share of their wallets to travel. July Google search volume for affordable travel is running 8% ahead of last year."
Wyndham Chief Financial Officer Michele Allen said that softening demand for hotels in Florida and the South Atlantic region is being partially offset by "a revival in cruise, city center and international vacations."
Earnings Results
Wyndham's global revenue per available room grew 7% year over year in the second quarter, and represented a 14% premium over the same period in 2019, according to a company earnings release. Its international portfolio continues to carry the weight of that RevPAR increase, and the metric was down 1% across the U.S. year over year but up 8% compared to 2019.
"U.S. RevPAR is now normalizing against the record comps we saw last year. Growth versus pre-COVID levels has remained strong. We saw growth of 9% in April moderate to 6% in May and then rebound to 10% in June. July month to date stands at 12%, a 200-basis-point acceleration from June," Ballotti said.
Outside of the U.S., hotel occupancy improved 16% year over year, driving RevPAR growth of 34%. The company's hotels in China were at 99% of 2019 RevPAR levels in the quarter.
Fee-related and other revenues grew 5% year over year to $358 million, "primarily reflecting higher royalty fees and franchise fees resulting from global RevPAR and system growth," the earnings release states. In 2022, that figure included $12 million from the company's select-service management business and owned hotels, which Wyndham exited and sold last year.
As a result, the company reported adjusted earnings before interest, tax, depreciation and amortization of $158 million for the quarter, down from $175 million in 2022.
Net income for the quarter was $70 million, compared to $92 million in 2022.
Wyndham partially attributed the decline in net income to refinancing of its Term Loan B Facility, which was set to mature in May 2025. The new $1.1 billion loan is set to mature in May 2030, and the company's next material debt maturity is ahead in 2027.
Net cash of $83 million and free cash flow of $74 million was generated by operations in the first quarter, and the company ended the quarter with a cash balance of $63 million and approximately $800 million in total liquidity.
As of press time, Wyndham Hotels & Resorts' stock was trading at $76.48 per share, down 4.3% year to date. The NYSE Composite Index was up 7.3% for the same period.
