Wyndham Hotels & Resorts, for the first quarter ended March 31, reported that global RevPAR grew 1% in constant currency and ancillary revenues grew 8% compared to the first quarter of 2023. The company’s development pipeline consists of nearly 2,000 hotels and approximately 243,000 rooms, an all-time record for the latter.
“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/CEO. “Increased interest from hotel owners in our brands has propelled our development pipeline to a record 243,000 rooms, marking an impressive 8% 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.”
First-quarter highlights include:
- System-wide rooms grew 4% year-over-year (YOY).
- Opened over 13,000 rooms, representing a YOY increase of 27%.
- Awarded 171 development contracts, an increase of 8% YOY.
- Development pipeline grew 1% sequentially and 8% YOY 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.
System size and development
Wyndham’s global system grew 4%, reflecting 1% growth in the U.S. and 8% internationally. As expected, these increases included strong growth in both the higher RevPAR midscale and above segments in the U.S. and the direct franchising business in China, which grew 3% and 13%, respectively. The company remains solidly on track to achieve its net room growth outlook of 3% to 4% for 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% YOY increase. Key highlights include:
- 15th consecutive quarter of sequential pipeline growth
- 5% growth in the U.S. and 9% internationally
- Approximately 69% of the pipeline is in the midscale and above segments, which grew 4% YOY
- Approximately 58% of the pipeline is international
- Approximately 79% of the pipeline is new construction, of which approximately 35% has broken ground
RevPAR
First-quarter global RevPAR increased 1% in constant currency compared to 2023, reflecting a 5% decline in the U.S. and growth of 14% internationally.
In the U.S., the company lapped the most difficult YOY 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 YOY RevPAR growth for the first quarter in all regions primarily driven by continued pricing power, with ADR up 12% and occupancy up 2%. 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 first-quarter 2023, reflecting a decline of $5 million in royalty and franchise fees, partially offset by an 8% 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 the company’s 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 first-quarter 2023. The decrease primarily reflects transaction-related expenses resulting from the unsuccessful hostile 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 first-quarter 2023. This decrease included a $10 million unfavorable impact from marketing fund variability, excluding which adjusted EBITDA grew 3% primarily reflecting favorable timing of expenses to better match revenue seasonality.
Diluted earnings per share was $0.19 compared to $0.77 in first-quarter 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 first-quarter 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% YOY as comparable adjusted EBITDA growth and the benefit of share repurchase activity were largely offset by higher interest expense.
During first-quarter 2024, the company’s marketing fund expenses exceeded revenues by $14 million, in line with expectations, while in first-quarter 2023, the 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 full-year 2024.
Full-Year 2024 outlook
The company has updated its full-year 2024 outlook to:
- YOY rooms growth between 3% and 4%
- YOY global RevPAR growth between 2% and 3%
- Fee-related and other revenues between $1.43 billion and $1.46 billion
- Adjusted EBITDA between $690 million and $700 million
- Adjusted net income between $341 million and $351 million
- Adjusted diluted EPS between $4.18 and $4.30
