PARSIPPANY, New Jersey—Wyndham Hotels & Resorts announced results for the three months ended March 31, 2024. Highlights include:
- Global RevPAR grew 1 percent in constant currency and ancillary revenues grew 8 percent compared to the first quarter of 2023.
- System-wide rooms grew 4 percent year-over-year.
- Opened over 13,000 rooms, representing a year-over-year increase of 27 percent.
- Awarded 171 development contracts, an increase of 8 percent year-over-year.
- Development pipeline grew 1% sequentially and 8 percent year-over-year to a record 243,000 rooms.
- Entered upscale extended stay segment through a strategic relationship with WaterWalk Extended Stay by Wyndham.
- Net cash provided by operating activities of $76 million and adjusted free cash flow of $102 million.
- Returned $89 million to shareholders through $57 million of share repurchases and quarterly cash dividends of $0.38 per share.
“We’re thrilled to announce another strong quarter of progress in our executions, openings, franchisee retention, and net room growth around the world,” said Geoff Ballotti, president and CEO. “Increased interest from hotel owners in our brands has propelled our development pipeline to a record 243,000 rooms, marking an impressive 8 percent increase. Our strong balance sheet and cash flow generation capabilities provide significant opportunity to continue to enhance returns to our shareholders over both the short and long-term, as evidenced by our Board of Directors’ approval of a $400 million increase in our share repurchase authorization.”
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 strong growth in both the higher RevPAR midscale and above segments in the United States and the direct franchising business in China, which grew 3 percent and 13 percent, respectively. The company remains solidly on track to achieve its net room growth outlook of 3 to 4 percent for the full year 2024, including an increase in its retention rate compared to 2023.
On March 31, 2024, the company’s global development pipeline consisted of nearly 2,000 hotels and approximately 243,000 rooms, representing another record-high level and an 8 percent year-over-year increase. Key highlights include:
- 15th consecutive quarter of sequential pipeline growth
- 5 percent growth in the United States and 9 percent internationally
- Approximately 69 percent of the pipeline is in the midscale and above segments, which grew 4 percent year-over-year
- Approximately 58 percent of the pipeline is international
- Approximately 79 percent of the pipeline is new construction, of which approximately 35 percent has broken ground
RevPAR
First quarter global RevPAR increased 1 percent in constant currency compared to 2023, reflecting a 5 percent decline in the United States and growth of 14 percent internationally.
In the United States, the company lapped the most difficult year-over-year comparisons during the first quarter, resulting in a decline of 440 basis points in occupancy and 50 basis points in ADR. Notably, the company saw improving trends in March with RevPAR improving 240 basis points compared to February. This improvement marks a significant pivot toward growth, preceding the peak leisure travel season.
Internationally, the company generated year-over-year RevPAR growth for the first quarter in all regions primarily driven by continued pricing power, with ADR up 12 percent and occupancy up 2 percent. The largest contributors to first-quarter growth were the Latin America and EMEA regions.
First Quarter Operating Results
- Fee-related and other revenues were $304 million compared to $308 million in the first quarter of 2023, reflecting a decline of $5 million in royalty and franchise fees, partially offset by an 8 percent increase in ancillary revenue streams. The decline in royalties and franchise fees was primarily driven by the decline in U.S. RevPAR and the lapping of our highest quarter of other franchise fees, partially offset by global net room growth and higher international RevPAR.
- The company generated net income of $16 million compared to $67 million in the first quarter of 2023. The decrease primarily reflects transaction-related expenses resulting from the unsuccessful takeover attempt by Choice Hotels, an impairment charge primarily related to development advance notes, and higher interest expense.
- Adjusted EBITDA was $141 million compared to $147 million in the first quarter of 2023. This decrease included a $10 million unfavorable impact from marketing fund variability, excluding which adjusted EBITDA grew 3 percent primarily reflecting favorable timing of expenses to better match revenue seasonality.
- Diluted earnings per share was $0.19 compared to $0.77 in the first quarter of 2023. This decrease reflects lower net income, partially offset by the benefit of a lower share count due to share repurchase activity.
- Adjusted diluted EPS was $0.78 compared to $0.86 in the first quarter of 2023. This decrease included $0.09 per share related to expected marketing fund variability (after estimated taxes). On a comparable basis, adjusted diluted EPS increased 1 percent year-over-year as comparable adjusted EBITDA growth and the benefit of share repurchase activity were largely offset by higher interest expense.
- During the first quarter of 2024, the company’s marketing fund expenses exceeded revenues by $14 million, in line with expectations; while in the first quarter of 2023, the company’s marketing fund expenses exceeded revenues by $4 million, resulting in $10 million of marketing fund variability. The company continues to expect marketing fund revenues to equal expenses during the full-year 2024.
Balance Sheet and Liquidity
The company generated $76 million of net cash provided by operating activities and adjusted free cash flow of $102 million in the first quarter of 2024. The company ended the quarter with a cash balance of $50 million and over $580 million in total liquidity.
The company’s net debt leverage ratio was 3.4 times at March 31, 2024, within the lower half of the company’s 3 to 4 times stated target range.
During the first quarter of 2024, the company executed $275 million of new forward-starting interest rate swaps on its Term Loan B Facility, which will begin in the fourth quarter of 2024 and expire in 2027. The fixed rate of the new swaps is 3.4 percent. As a result, nearly all the company’s Term Loan B Facility now has a fixed rate through the end of 2027.
Share Repurchases and Dividends
During the first quarter, the company repurchased approximately 719,000 shares of its common stock for $57 million. The company’s Board of Directors recently increased the company’s share repurchase authorization by $400 million.
The company paid common stock dividends of $32 million, or $0.38 per share, during the first quarter of 2024.
Full-Year 2024 Outlook
The company is updating its outlook as follows to reflect the impact of first-quarter share repurchase activity:
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.
