Wyndham cuts full-year RevPAR guidance in Q2 earnings

PARSIPPANY, New Jersey — Wyndham Hotels & Resorts cut its full-year RevPAR guidance but left its adjusted EBITDA guidance the same as part of its second-quarter earnings report.

“The resilience and highly cash-generative nature of our business model was once again on full display this quarter,” Geoff Ballotti, president and CEO, said in a news release. “Amid a normalizing domestic RevPAR environment, we delivered strong adjusted EBITDA driven by net room and ancillary fee growth.”

Wyndham said systemwide rooms grew 4% year-over-year as it opened over 18,000 globally (7,000 in the U.S., a 16% year-over-year increase), including its first ECHO Suites Extended Stay by Wyndham hotel in South Carolina. The company said it awarded 180 development contracts globally, a 33% increase year over year. Its development pipeline grew 1% sequentially and 7% year over year to a record 245,000 rooms.

“We awarded 33% more hotel contracts domestically, which grew our development pipeline to a record 245,000 rooms and drove significant increases in our U.S, international and global royalty rates,” Ballotti said. “We’ve returned over $250 million to shareholders, representing 4% of our beginning market capitalization this year.”

Analyst Michael Bellisario of R.W. Baird said Wyndham's headline earnings were well ahead of Baird/Street forecasts, but the core business was only just in line with their expectation with total fees -$1 million versus Baird's model. “Full-year RevPAR guidance has been cut, and we believe that was the base case for the buy-/sell-side; however, the magnitude of the reduction is greater than we thought (U.S. softness the driver),” he said. “Implied 2H24 RevPAR is forecasted to be flat to +1%. Adjusted EBITDA guidance was unchanged (surprising, in our view, but related to the insurance recoveries and better margins; our math has total fees -$10 million or more).”

Bellisario said the RevPAR cut (which implies flat to +1% growth in the second half) was expected but not to the degree it was revised. “The prior range was +2%-3%, and we had been expecting a reduction but not by this much,” he said. “Last quarter, we had thought management could/should reduce the guidance high ends to reflect weaker domestic RevPAR trends; now, domestic trends are not improving as quickly as previously expected, and the international outlook has softened a bit (China).”

Analyst C. Patrick Scholes of Truist Securities said the guidance was unprecedented. “As we have talked about, [Wyndham] is the least sensitive hotel company in our coverage to changes in RevPAR,” he said. “The EBITDA guide was unchanged despite the RevPAR guidance being lowered by 250 bps at the midpoint. This may be the only time we have seen a guidance move like this.”

Other highlights from the earnings:

• Global RevPAR growth was 2% YOY in constant currency, reflecting flat growth in the U.S. and 7% growth internationally.
• Ancillary revenue grew 6% YOY.
• Fee-related and other revenues increased by $8 million YOY, reflecting increases in royalties and franchise fees, marketing revenues, and ancillary fee streams.