Wyndham Reports Full-Year and Q4 2023 Results

PARSIPPANY, New Jersey—Wyndham Hotels & Resorts announced results for the three months and year ended Dec. 31, 2023. Highlights include:

• System-wide rooms grew organically by 3.5 percent year-over-year, a record high.
• Opened a record 66,000 organic rooms, representing a year-over-year increase of 3 percent.
• Global retention rate—including all terminations—improved another 30 basis points to a record 95.6 percent.
• Development pipeline grew 1 percent sequentially and by 10 percent year-over-year to a record 240,000 rooms.
• Grew ECHO Suites pipeline nearly 60 percent year-over-year with 98 new contract signings.
• Signed 766 contracts for legacy brands, an increase of 8 percent year-over-year.
• Fourth quarter diluted earnings per share of $0.60 and net income of $50 million; adjusted diluted EPS of $0.91, adjusted net income of $75 million and adjusted EBITDA of $154 million.
• Full-year 2023 diluted EPS of $3.41 and net income of $289 million; adjusted diluted EPS of $4.01, adjusted net income of $341 million, and adjusted EBITDA of $659 million.
• Net cash provided by operating activities of $376 million and free cash flow of $339 million for the full year.
• Returned $515 million to shareholders for the full year through $397 million of share repurchases and quarterly cash dividends of $0.35 per share.
• Board of Directors recently authorized a 9 percent increase in the quarterly cash dividend to $0.38 per share beginning with the dividend expected to be declared in the first quarter of 2024.

“We are tremendously proud to report fourth-quarter results that demonstrate the continued success of our global strategy and our accelerating momentum,” said Geoff Ballotti, president and CEO. “Despite the distraction, uncertainty, and misperceptions caused by Choice and their slanted and constant communications to our franchisee base, room openings accelerated and our global development pipeline grew by 10 percent to an all-time high of 240,000 rooms. Our team opened 27 percent more rooms than last year in the fourth quarter and we welcomed 500 new hotels to our system in 2023. This, when combined with our improving franchisee engagement and record retention rate, drove the best organic system growth we’ve ever achieved.

We grew comparable adjusted EBITDA by 6 percent and returned over half a billion dollars to our shareholders through dividends and share repurchases. We are confident in the continued effectiveness of our growth strategy and see exceptional value-creation opportunities in the years ahead.”

System Size and Development

The company’s global system grew 3.5 percent, marking 12 consecutive quarters of organic growth and reflecting 1 percent growth in the United States and 7 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 also increased its retention rate, which includes all terminations, by another 30 basis points year-over-year, ending the year at a record 95.6 percent.

On De. 31, 2023, the company’s global development pipeline consisted of over 1,950 hotels and approximately 240,000 rooms, representing another record-high level and a 10 percent year-over-year increase. Highlights include:

• 14th consecutive quarter of sequential pipeline growth
• 8 percent growth in the United States and 11 percent internationally
• Approximately 70 percent of the pipeline is in the midscale and above segments, which grew 6 percent year-over-year
• Approximately 58 percent of the pipeline is international
• Approximately 79 percent of the pipeline is new construction, of which approximately 34 percent has broken ground
• The company awarded 766 new contracts for its legacy brands in full-year 2023, an increase of 8 percent compared to full-year 2022. Additionally, the company awarded 98 additional new contracts for its ECHO Suites brand, and, as of Dec. 31, 2023, the company had awarded 268 contracts, or over 33,000 rooms, for the brand.

RevPAR

Fourth quarter global RevPAR declined 1 percent in constant currency compared to 2022 reflecting a 4 percent decline in the United States and growth of 7 percent internationally. For the full year, global RevPAR grew 5 percent in constant currency compared to 2022 reflecting a 1 percent decline in the United States and growth of 21 percent internationally.

The company had achieved record RevPAR in the United States during the preceding year due to COVID-impacted travel patterns. Comparing to 2019 to neutralize for COVID-impacted travel patterns, U.S. RevPAR grew 10 percent in fourth quarter—a 120 basis point acceleration from third quarter 2023 growth—and 9 percent for the full year. Internationally, year-over-year RevPAR growth for both the fourth quarter and the full year was primarily driven by higher occupancy levels. Compared to 2019, international RevPAR grew in the fourth quarter and full year by 44 percent and 36 percent, respectively, on a constant-currency basis.

Operating Results

Fourth Quarter

• Fee-related and other revenues were $320 million compared to $310 million in fourth quarter 2022 reflecting global net room growth as well as higher license and ancillary fees.
• The company generated net income of $50 million compared to $56 million in fourth quarter 2022. The decrease was reflective of a higher effective tax rate, higher interest expense, foreign currency impact from hyperinflation in Argentina, and transaction-related expenses resulting from the offer by Choice Hotels, partially offset by higher adjusted EBITDA.
• Adjusted EBITDA grew 22 percent to $154 million from $126 million. This increase included a $21 million impact from marketing fund variability, excluding which adjusted EBITDA grew 6 percent primarily reflecting higher fee-related and other revenues.
• Diluted earnings per share were $0.60 compared to $0.63 in fourth quarter 2022. This decrease reflects lower net income, partially offset by the benefit of a lower share count due to share repurchase activity.
• Adjusted diluted EPS grew 26 percent to $0.91 per share from $0.72 per share. This increase included $0.19 per share related to the marketing fund variability (after estimated taxes), excluding which adjusted diluted EPS was unchanged year-over-year as adjusted EBITDA growth and the benefit from share repurchase activity was offset by higher interest expense.
• During fourth quarter 2023, the company’s marketing fund revenues exceeded expenses by $9 million; while in fourth quarter 2022, the company’s marketing fund expenses exceeded revenues by $12 million, resulting in $21 million of marketing fund variability.

Full Year

• Fee-related and other revenues were $1,384 million compared to $1,354 million in full-year 2022, which included $50 million from the company’s select service management business and owned hotels, which were exited in 2022. On a comparable basis, fee-related and other revenues increased 6 percent year-over-year primarily reflecting global RevPAR and net room growth, higher license and ancillary fees, and pass-through revenues associated with the company’s global franchisee conference in September, which was held for the first time since 2019.
• The company generated a net income of $289 million compared to $355 million in full-year 2022, which included $37 million from the select-service managed and owned hotels. The decrease was reflective of a higher effective tax rate, higher interest expense, foreign currency impact from hyperinflation in Argentina, and transaction-related expenses resulting from the unsolicited offer by Choice Hotels, partially offset by higher adjusted EBITDA.
• Adjusted EBITDA was $659 million compared to $650 million in full-year 2022, which included $18 million from the select-service managed and owned hotels. The growth in adjusted EBITDA was further impacted by $11 million of unfavorable marketing fund variability. On a comparable basis, adjusted EBITDA increased 6 percent reflecting higher fee-related and other revenues.
• Diluted earnings per share were $3.41 compared to $3.91 in full-year 2022, which included $0.40 per share from the select-service managed and owned hotels. This decrease reflects the lower net income, partially offset by the benefit of a lower share count due to share repurchase activity.
• Adjusted diluted EPS was $4.01 per share compared to $3.96 per share in full-year 2022, which included $0.15 per share from the select-service managed and owned hotels. This growth in adjusted diluted EPS was further impacted by $0.09 per share (after estimated taxes) of unfavorable marketing fund variability. On a comparable basis, adjusted diluted EPS increased 8% year-over-year reflecting the adjusted EBITDA growth and the benefit from share repurchase activity, partially offset by higher interest expense.
• During full-year 2023, the company’s marketing fund revenues exceeded expenses by $9 million; while in 2022, the company’s marketing fund revenues exceeded expenses by $20 million, resulting in $11 million of marketing fund variability.

Balance Sheet and Liquidity

The company generated $376 million of net cash provided by operating activities and a free cash flow of $339 million in the full year 2023. The company ended the quarter with a cash balance of $66 million and approximately $650 million in total liquidity.

The company’s net debt leverage ratio was 3.2 times on Dec. 31, 2023, within the lower half of the company’s 3 to 4 times stated target range.

Share Repurchases and Dividends

During the fourth quarter, the company repurchased approximately 1.7 million shares of its common stock for $127 million. For the full-year 2023, the company repurchased approximately 5.5 million shares of its common stock for $397 million, at an average price of $72.25, 8 percent lower than trading levels as of Feb. 13, 2024.

The company paid common stock dividends of $28 million, or $0.35 per share, in the fourth quarter of 2023 for a total of $118 million, or $1.40 per share, for the full-year 2023.

For the full year 2023, the company returned $515 million to shareholders through share repurchases and quarterly cash dividends.

The company’s Board of Directors authorized a 9 percent increase in the quarterly cash dividend to $0.38 per share, beginning with the dividend expected to be declared in the first quarter of 2024.

Full-Year 2024 Outlook

NOTE: Outlook for adjusted EBITDA, adjusted net income, adjusted diluted EPS and free cash flow conversion rate excludes all expenses and cash outlays associated with the offer by Choice Hotels, which are currently anticipated to approximate $75 million before taxes.

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 expects marketing revenues to equal expenses during full-year 2024 though the 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 applied, such excluded items could be material, individually, or in the aggregate, to the reported results.