Wyndham reports NUG, pipeline growth in Q3

PARSIPPANY, New Jersey — Wyndham Hotels & Resorts reported gains in both its net rooms growth and development pipeline as part of its third quarter earnings, which were released after the market closed on Wednesday.

Wyndham’s global systemwide rooms grew 4% year over year, which reflected 1% growth in the U.S. and 8% growth internationally. Global RevPAR grew 1% in constant currency compared to 2023, which reflects a 1% decline in the U.S. and 7% growth internationally.

“We awarded 10% more franchise contracts domestically this quarter, driving 5% growth in our development pipeline,” said Wyndham President and CEO Geoff Ballotti. “Stabilizing RevPAR trends and improving comparisons coupled with increased infrastructure demand are expected to pave the way for improved results in the coming quarters.”

Wyndham said its U.S. RevPAR included a 2% decline for its economy segment, while its midscale and above segments were unchanged year-over-year. The company said its U.S. economy brands gained 50 basis points in market share in Q3, driven by performance in the oil and gas markets. The market share in the five states with the highest infrastructure bill spending collectively grew 80 basis points. Overall, occupancy in the U.S. remained consistent.

Internationally, RevPAR for Wyndham’s EMEA, Latin America and Canada regions increased 13% with ADR up 11% and occupancy up 2%. RevPAR for its Asia Pacific region hotels declined 7%, driven by a 2% decrease in occupancy and a 5% decrease in ADR. But the company said its Q3 RevPAR performance in the region was 500 basis points higher than the previous quarter.

Wyndham didn’t adjust its full year 2024 outlook for room growth (3-5%), RevPAR (approximately flat), fee-related and other revenues ($1.41-$1.43 billion), adjusted EBITDA ($690-$700 million) or adjusted net income ($338-$348 million). It made a slight upward revision on its adjusted diluted EPS, from $4.20-$4.32 to $4.22-$4.34.

The company said its outlook for adjusted EBITDA, adjusted net income, adjusted diluted EPS and adjusted free cash flow conversion rate excludes all previous 2024 expenses and cash outlays associated with its defense of an unsuccessful hostile takeover attempt by Choice Hotels International.

What analysts said

Analyst Michael Bellisario of R.W. Baird said Wyndham’s numbers and operating performance were in line with expectations. “We see no surprises with the update – we continue to have a positive view of Wyndham shares. We expect analyst/investor focus to be on recent RevPAR trends (domestic), which have improved in recent weeks due to hurricane-related demand; we model a 50 basis points RevPAR benefit in 4Q24… On the development front, momentum remains positive as full-year net unit growth is tracking at/above the high end of the guidance range, retention continues to improve, and signings are increasing.”

C. Patrick Scholes of Truist Securities said the earnings were uneventful and most unsurprising. “While full-year RevPAR guide was unchanged and no 4Q guide was provided, we suspect there could be at least modest upside to RevPAR due to post-hurricane demand, something we have been observing the past two weeks in weekly STR RevPAR results.”

Pipeline growth

Wyndham said its development pipeline grew 1% from Q2 and 5% year-over-year to a record 248,000 rooms. The company said it opened 17,000 rooms globally, including nearly 7,000 in the U.S., which increased 15% year-over-year, including its second ECHO Suites Extended Stay by Wyndham in Plano, Texas.

Wyndham said it awarded 197 development contracts globally in the quarter, including 95 contracts in the U.S., which represents 10% year-over-year growth.

Approximately 58% of the pipeline is international and 79% is new construction with approximately 35% of those projects breaking ground. Wyndham said approximately 14% of its total pipeline represents its ECHO Suites brand, which has awarded 283 contract since its launch.

Other notes from its earnings release: 

• Wyndham’s fee-related and other revenues were $394 million compared to $400 million from a year ago, which included $18 million of pass-through revenue associated with its 2023 global conference. The company said absent of that revenue, fee-related and other revenue increased 3% year over year, which reflects higher royalties, franchise see and ancillary revenue.
• The company’s adjusted EBITDA grew 4% YOY to $208 million.
• Wyndham generated $79 million of net cash and $96 million of adjusted free cash flow in Q3. It ended the quarter with a cash balance of $72 million and approximately $750 million in total liquidity. It also executed $350 million of new interest rate swaps on its Term B loan facility, which will expire in 2028. The company ended the quarter with approximately 80% of its total debt at a fixed rate and 20% variable.
• The company repurchased approximately 1.3 million shares of its common stock for $97 million and has purchased 3.8 million shares for $285 million through Q3.