PARSIPPANY, New Jersey—Wyndham Hotels & Resorts announced results for the three months ended September 30, 2024. Highlights include:
- System-wide rooms grew 4 percent year-over-year.
- Opened over 17,000 rooms globally, including nearly 7,000 in the United States, which increased 15 percent year-over-year, and the second ECHO Suites Extended Stay by Wyndham.
- Awarded 197 development contracts globally, including 95 contracts in the United States, which increased 10 percent year-over-year.
- Development pipeline grew 1 percent sequentially and 5 percent year-over-year to a record 248,000 rooms.
- Global RevPAR grew 1 percent in constant currency.
- Ancillary revenues increased 8 percent compared to third quarter 2023.
- Diluted earnings per share increased 7 percent, to $1.29, and adjusted diluted EPS grew 6 percent, to $1.39, or approximately 10 percent on a comparable basis.
- Net income was $102 million for the third quarter, a 1 percent decrease over the prior-year quarter; adjusted net income was $110 million, a 1 percent decrease over the prior-year quarter, or a 3 percent increase on a comparable basis.
- Adjusted EBITDA increased 4 percent compared with the prior-year quarter, to $208 million, or 7 percent on a comparable basis.
- Returned $126 million to shareholders through $97 million of share repurchases and quarterly cash dividends of $0.38 per share.
“Our teams around the world once again delivered exceptional results, executing our long-term growth strategy and achieving 7 percent growth in comparable adjusted EBITDA fueled by continued system expansion, higher royalty rates, and growth in our ancillary revenues,” said Geoff Ballotti, president and CEO. “We awarded 10 percent more franchise contracts domestically this quarter, driving 5 percent growth in our development pipeline. Stabilizing RevPAR trends and improving comparisons coupled with increased infrastructure demand are expected to pave the way for improved results in the coming quarters. We remain steadfast in our long-term strategy, aimed at delivering outstanding value to our guests, franchisees, and shareholders to whom we’ve returned nearly $380 million year-to-date in the form of dividends and share repurchases.”
System Size and Development
The company’s global system grew 4 percent, reflecting 1 percent growth in the United States and 8% percent internationally. As expected, these increases included 3 percent growth in the higher RevPAR midscale and above segments in the United States, as well as strong growth in the company’s EMEA and Latin America regions, which each grew 11 percent. The company continued to improve its retention rate and remains on track to achieve its net room growth outlook of 3-4 percent for the full year 2024.
On September 30, 2024, the company’s global development pipeline consisted of approximately 2,100 hotels and 248,000 rooms, representing another record-high level and a 5 percent year-over-year increase. Highlights include:
- 7 percent growth in the United States and 3 percent internationally
- 17th consecutive quarter of sequential pipeline growth
- Approximately 70 percent of the pipeline is in the midscale and above segments, which grew 6 percent year-over-year
- Approximately 14 percent of the pipeline represents ECHO Suites Extended Stay by Wyndham for which the company has awarded a total of 283 contracts since its launch.
- Approximately 58 percent of the pipeline is international
- Approximately 79 percent of the pipeline is new construction and approximately 35 percent of these projects have broken ground
- During the third quarter of 2024, the company awarded 197 new contracts, including 95 contracts in the United States, which increased 10 percent year-over-year.
RevPAR
In the United States, RevPAR for the company’s midscale and above segments was unchanged year-over-year while RevPAR for its economy segment declined 2 percent reflecting a modest acceleration from the second quarter with a sequential improvement of 10 basis points. Additionally, the company’s U.S. economy brands continued to strengthen their position, gaining 50 basis points of market share in the third quarter driven by performance in oil and gas markets, which grew 250 basis points in the quarter, and in the five states with the highest infrastructure bill spend, which collectively grew 80 basis points. U.S. occupancy remained consistent, highlighting the resilience of the select-service space and consumer demand for these products.
Internationally, RevPAR for the company’s EMEA, Latin America, and Canada regions collectively increased 13 percent due to both continued pricing power, with ADR up 11 percent, and occupancy growth of 2 percent. RevPAR for the company’s APAC region declined 7 percent driven by a 2 percent decrease in occupancy and a 5 percent decrease in ADR. Importantly, the third quarter RevPAR performance for APAC represented a 500 basis point sequential improvement.
Third Quarter Operating Results
- Fee-related and other revenues were $394 million compared to $400 million in third quarter 2023, which included $18 million of pass-through revenues associated with the company’s 2023 global franchisee conference, absent which, fee-related and other revenue increased 3 percent. The growth in fee-related and other revenues reflects higher royalties and franchise fees and ancillary revenues.
- The company generated net income of $102 million compared to $103 million in third quarter 2023. The decrease was primarily reflective of higher interest expense, partially offset by higher adjusted EBITDA.
- Adjusted EBITDA grew 4 percent to $208 million compared to $200 million in third quarter 2023. This increase included a $5 million unfavorable impact from marketing fund variability, excluding which adjusted EBITDA grew 7 percent on a comparable basis, primarily reflecting higher royalties and franchise fees, increased ancillary revenues, and margin expansion.
- Diluted earnings per share was $1.29 compared to $1.21 in third quarter 2023. This increase primarily reflects the benefit of a lower share count due to share repurchase activity.
- Adjusted diluted EPS grew 6 percent to $1.39 compared to $1.31 in third quarter 2023. This increase included an unfavorable impact of $0.04 per share related to expected marketing fund variability (after estimated taxes). On a comparable basis, adjusted diluted EPS increased approximately 10 percent year-over-year reflecting comparable adjusted EBITDA growth and the benefit of share repurchase activity, partially offset by higher interest expense.
- During third quarter 2024, the company’s marketing fund revenues exceeded expenses by $12 million, in line with expectations; while in third quarter 2023, the company’s marketing fund revenues exceeded expenses by $17 million, resulting in $5 million of marketing fund variability. The company continues to expect marketing fund revenues to roughly equal expenses during full-year 2024.
Balance Sheet and Liquidity
The company generated $79 million of net cash provided by operating activities and $96 million of adjusted free cash flow in third quarter 2024. The company ended the quarter with a cash balance of $72 million and approximately $750 million in total liquidity.
The company’s net debt leverage ratio was 3.5 times on September 30, 2024, the midpoint of the company’s 3 to 4 times stated target range.
During the third quarter of 2024, the company executed $350 million of new interest rate swaps on its Term Loan B Facility, which will expire in 2028. The fixed rate of the new swaps is 3.3 percent. As a result, the company ended the third quarter with approximately 80 percent of its total debt at a fixed rate and 20 percent variable.
Share Repurchases and Dividends
During the third quarter, the company repurchased approximately 1.3 million shares of its common stock for $97 million. Year-to-date through September 30, the company repurchased approximately 3.8 million shares of its common stock for $285 million.
The company paid common stock dividends of $29 million, or $0.38 per share, during the third quarter 2024 and $92 million, or $1.14 per share, year-to-date.
Full-Year 2024 Outlook
Year-over-year growth rates for adjusted EBITDA, adjusted net income and adjusted diluted EPS are not comparable due to full-year 2023 marketing fund revenues exceeding expenses by $9 million, which substantially completed the recovery of the $49 million support the company provided to its owners during COVID. The company continues to expect marketing fund revenues to equal expenses during full-year 2024 though seasonality of spend will affect the quarterly comparisons throughout the year.
The company is providing certain financial metrics only on a non-GAAP basis because, without unreasonable efforts, it is unable to predict with reasonable certainty the occurrence or amount of all of the adjustments or other potential adjustments that may arise in the future during the forward-looking period, which can be dependent on future events that may not be reliably predicted. Based on past reported results, where one or more of these items have been applicable, such excluded items could be material, individually or in the aggregate, to the reported results.
