Wyndham says Q3 results support standalone growth

Wyndham Hotels & Resorts reported modest beats on 3Q23 earnings late Wednesday and during Thursday morning's earnings call further reiterated its position that rejects Choice Hotels unsolicited stock and cash offer.

Wyndham President and CEO Geoff Ballotti stated, “Our Board of Directors, together with our financial and legal advisors, closely reviewed Choice's latest proposal and determined, for multiple reasons, that it is not in the best interest of our shareholders. They remain confident that our standalone growth prospects offer superior, risk-adjusted returns to Wyndham shareholders.”

Ballotti said supporting their standalone growth opportunities are 3Q results that were highlighted by continued growth in global RevPAR, ongoing domestic and international organic net room growth and another 8% increase in hotel contracts awarded to franchisees driving Wyndham’s development pipeline to a record 1,930 hotels.

Our Board of Directors, together with our financial and legal advisors, closely reviewed Choice's latest proposal and determined, for multiple reasons, that it is not in the best interest of our shareholders. They remain confident that our standalone growth prospects offer superior, risk-adjusted returns to Wyndham shareholders.

Geoff Ballotti

Share this quote

“Our economy brands gained market share domestically amidst a backdrop of normalizing U.S. leisure demand, and international occupancy continued to recover,” Ballotti continued. “Adjusted EBITDA grew in line with our expectations, we generated strong free cash flow, and we returned significant capital to our shareholders. We remain focused on our growth strategy, which includes continued system expansion through our Echo Suites by Wyndham brand and further improvements in franchisee retention, as well as the multi-year benefit expected from the U.S. infrastructure bill. We’re enthusiastic about our ability to deliver exceptional value to our shareholders, guests, franchisees and team members in the months and years ahead."

In 3Q23, fee-related and other revenues was $400 million compared to $375 million in third quarter 2022, reflecting global RevPAR and net room growth, higher license and ancillary fees as well as the pass-through revenues associated with the company's global franchisee conference in September, which was held for the first time since 2019.

Wyndham generated net income of $103 million, or $1.21 per diluted share, compared to $101 million, or $1.13 per diluted share, in third quarter 2022. The increase was reflective of higher adjusted EBITDA in the company's hotel franchising segment and a lower effective tax rate, partially offset by higher interest expense.

Adjusted diluted EPS grew 8% reflecting higher net income and a lower share count due to share repurchase activity. Adjusted EBITDA increased 5% to $200 million primarily reflecting higher fee-related and other revenues as well as marketing fund variability.

During third quarter 2023, Wyndham's marketing fund revenues exceeded expenses by $17 million; while in third quarter 2022, the company’s marketing fund revenues exceeded expenses by $12 million.

Wyndham’s global system grew 3%, reflecting 1% growth in the U.S. and 6% growth internationally. As expected, Wyndham said 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 4% and 16%, respectively.

Third quarter global RevPAR grew by 3% in constant currency compared to 2022 reflecting a 1% decline in the U.S. and growth of 16% internationally. Wyndham had achieved record-breaking RevPAR in the U.S. during the preceding year due to COVID-impacted travel patterns. Its U.S. economy brands gained market share of 100 basis points in the third quarter. Comparing to 2019 to neutralize for COVID-impacted travel patterns, U.S. RevPAR grew 9%, a 30-basis point acceleration from second quarter 2023 growth.

International RevPAR growth was driven by higher occupancy levels and stronger pricing power in connection with COVID recovery and compared to 2019 grew 45% on a constant-currency basis, a 120 basis point acceleration from second quarter 2023 growth.

On September 30, Wyndham’s global development pipeline consisted of over 1,930 hotels and approximately 237,000 rooms, representing a 12% year-over-year increase, including 16% growth in the U.S. Approximately 69% of the company’s pipeline is in the midscale and above segments. Approximately 58% of its development pipeline is international. Approximately 80% of the pipeline is new construction, of which approximately 34% has broken ground.

During 3Q23, Wyndham awarded 172 new contracts for its legacy brands, an increase of 4% year-over-year. Additionally, it awarded 60 new contracts for its Echo Suites Extended Stay by Wyndham brand and, as of September 30, contracts awarded for the brand was 265, or nearly 33,000 rooms.

During the third quarter, Wyndham repurchased approximately 1.4 million shares of its common stock for $105 million. Year-to-date through September 30, the company repurchased approximately 3.8 million shares of its common stock for $270 million.

Wyndham paid common stock dividends of $29 million, or $0.35 per share.

The company updated outlook for the remainder of 2023 was unchanged with the exception of a 2-cent increase in adjusted diluted EPS.