PARSIPPANY, New Jersey—Wyndham Hotels & Resorts announced results for the three months ended June 30, 2022. Highlights include:
- Global RevPAR grew 23 percent compared to Q2 2021 in constant currency.
- System-wide rooms grew 3 percent year-over-year, including 2 percent of growth in the United States and 4 percent of growth internationally.
- Hotel franchising segment revenues grew 18 percent year over year.
- Diluted earnings per share of $1.00 and adjusted diluted earnings per share of $1.07.
- Net income of $92 million and adjusted net income of $99 million.
- Adjusted EBITDA of $175 million.
- Year-to-date net cash provided by operating activities of $242 million and free cash flow of $224 million.
- Domestic development signings increased 77 percent, including 22 new construction projects for the company’s new extended-stay brand, bringing the total number to 72 since its launch in March.
- Completed the sale of the Wyndham Grand Rio Mar Resort.
- Returned $171 million to shareholders through $142 million of share repurchases and a quarterly cash dividend of $0.32 per share.
- Company raises full-year 2022 outlook.
“We kicked off our high-demand summer season with the strongest Memorial Day we’ve ever experienced, as guests traveled further, stayed longer, and spent more at our hotels than they did pre-pandemic,” said Geoffrey A. Ballotti, president and CEO. “Our business experienced another strong quarter performing above both last year and 2019 as international recovery accelerated and our development teams grew our pipeline to a record level. Our second quarter results once again demonstrated the strength and durability of our business model and we are well on track to deliver on our 2022 commitments.”
Fee-related and other revenues increased 10 percent year-over-year to $354 million as the impact from the increase of global RevPAR and higher license fees were partially offset by a $21 million impact from the sale of the company’s owned hotels and the exit of its select-service management business. The company generated a net income of $92 million, or $1.00 per diluted share, an increase of $24 million, or $0.27 per diluted share, reflecting higher adjusted EBITDA, lower depreciation, and amortization expense due to the sale of the company’s owned hotels and lower expenses associated with the early extinguishment of debt. Adjusted EBITDA increased $7 million, or 4 percent, versus 2021 to $175 million reflecting the revenue growth, which was partially offset by an $8 million impact from the sale of the company’s owned hotels and the exit of its select-service management business as well as a $2 million unfavorable timing impact from the marketing fund.
The company’s global system grew by 3 percent, reflecting 2 percent growth in the United States and 4 percent growth 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 7 percent and 12 percent, respectively. The company remains solidly on track with its goal of achieving a retention rate above 95 percent and its net room growth outlook of 2 to 4 percent for the full year of 2022.
Second quarter RevPAR grew 23 percent globally in constant currency, including 15 percent growth in the United States and 59 percent growth internationally. The increase is approximately 80 percent driven by stronger pricing power and 20 percent driven by higher occupancy levels.
Hotel franchising revenues increased 18 percent year-over-year to $335 million primarily due to the global RevPAR increase and higher license and other fees. Hotel franchising adjusted EBITDA increased 11 percent to $185 million reflecting the growth in revenues, partially offset by a 340 basis point unfavorable timing impact from the marketing fund.
Hotel management revenues decreased 59 percent year-over-year to $51 million, including a $53 million decrease in cost-reimbursement revenues, which have no impact on adjusted EBITDA. Absent cost-reimbursements, hotel management revenues decreased $19 million, or 50 percent, to $19 million due to the sale of the company’s owned hotels and the exit of its select-service management business. Hotel management adjusted EBITDA decreased $10 million year-over-year reflecting the same.
Development
The company awarded 187 new contracts this quarter compared to 154 in the second quarter 2021. On June 30, 2022, the company’s global development pipeline consisted of approximately 1,600 hotels and approximately 208,000 rooms, of which approximately 80 percent is in the midscale and above segments (nearly 70 percent in the United States). The pipeline grew 9 percent year-over-year, including 17 percent domestically and 5 percent internationally. Approximately 62 percent of the company’s development pipeline is international and 78 percent is new construction, of which approximately 36 percent has broken ground.
Sale of Owned Hotel
On May 24, 2022, the company completed the sale of the Wyndham Grand Rio Mar Resort in Puerto Rico for gross proceeds of approximately $62 million. There was no gain or loss on the sale as the proceeds approximated adjusted net book value. The company entered into a 20-year franchise agreement with the buyer.
Cash and Liquidity
The company generated $242 million of net cash provided by operating activities year-to-date and $224 million of free cash flow. The company ended the quarter with a cash balance of $400 million and approximately $1.1 billion in total liquidity.
Share Repurchases and Dividends
During the second quarter, the company repurchased approximately 1.9 million shares of its common stock for $142 million. The company also paid common stock dividends of $29 million, or $0.32 per share, in the second quarter.
Full-Year 2022 Outlook
The company is increasing its outlook as follows to reflect future projections related to the company’s license fees from Travel & Leisure based on their full-year 2022 Gross VOI Sales outlook provided on April 28, 2022, as well as the impact of second quarter share repurchase activity.
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.
