“During the second quarter, we celebrated the tremendous progress we’ve made in our five-year journey as a new public company with another quarter of solid results including global RevPAR growth of 7%, net room growth of 4% and the 12th consecutive quarter of sequential growth in our development pipeline, which has never been stronger,” said Geoff Ballotti, president/CEO. “International travel demand continues to accelerate, our U.S. economy brands continue to outperform the industry and our nation’s infrastructure bill spend is expected to represent a meaningful tailwind for our franchisees in the months and years ahead. We remain very confident in our ability to deliver outstanding value for our franchisees and shareholders, as does our board of directors, who today approved a $400 million increase in our share repurchase authorization, reflecting their confidence in the ongoing strength of our business and our strong free cash flow.”
Highlights include:
- System-wide rooms grew 4% YOY.
- Development pipeline grew 1% sequentially and 10% year-over-year (YOY).
- Signings of 24,000 rooms grew 6% YOY and 7% compared to 2019.
- Awarded 60 new construction projects for ECHO Suites Extended Stay by Wyndham in July, including its first hotels in Canada, bringing the total number of contracts to 265.
- Returned $139 million to shareholders through $109 million of share repurchases and a quarterly cash dividend of $0.35 per share.
- Successfully completed the refinancing of its Term Loan B Facility, extending maturity from 2025 to 2030.
Second-quarter financial results
The comparability of Wyndham’s second-quarter results is impacted by the sale of its owned hotels and the exit of its select-service management business, both of which occurred in 2022, as well as quarterly timing variances from its marketing funds.
- Fee-related and other revenues was $358 million compared to $354 million in second quarter 2022, which included $12 million from the company’s select-service management business and owned hotels. On a comparable basis, fee-related and other revenues increased 5% YOY primarily reflecting higher royalties and franchise fees resulting from global RevPAR and system growth.
- The company generated net income of $70 million, or $0.82 per diluted share, compared to $92 million, or $1.00 per diluted share, in second-quarter 2022. The decline in net income was expected and reflective of the marketing fund variability, higher interest expense and transaction-related costs primarily related to the company’s refinancing of its Term Loan B Facility. On a comparable basis, adjusted diluted earnings per share grew 10% reflecting 8% growth in comparable basis adjusted EBITDA and a lower share count due to share repurchase activity.
- Adjusted EBITDA was $158 million compared to $175 million in second-quarter 2022. On a comparable basis, adjusted EBITDA increased 8% YOY primarily reflecting higher fee-related and other revenues.
- During second-quarter 2023, the company’s marketing fund expenses exceeded revenues by $15 million; while in second-quarter 2022, the company’s marketing fund revenues exceeded expenses by $12 million, resulting in $27 million of marketing fund variability.
System Size
The company’s global system grew 4%, reflecting 1% growth in the U.S. and 9% growth 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 4% and 13%, respectively, as well as 80 basis points of growth globally and 200 basis points internationally from the acquisition of the Vienna House brand. The company remains solidly on track to achieve its net room growth outlook of 2 to 4% for the full year 2023, including an increase in its retention rate compared to 2022.
RevPAR
Second-quarter global RevPAR grew by 7% in constant currency compared to 2022 reflecting a 1% decline in the U.S. and growth of 34% internationally. The company had achieved record-breaking RevPAR in the U.S. during the preceding year due to COVID-impacted travel patterns. Comparing to 2019 to neutralize for these impacts, U.S. RevPAR grew 8%, a 30 basis point acceleration from first-quarter 2023 growth. The international RevPAR growth was driven equally by stronger pricing power and higher occupancy levels.
Development
- On June 30, the company’s global development pipeline consisted of nearly 1,850 hotels and approximately 228,000 rooms, representing a 10% YOY increase, including 22% growth in the U.S.
- Approximately 72% of the company’s pipeline is in the midscale and above segments.
- Approximately 57% of the company’s development pipeline is international.
- Approximately 81% of the company’s pipeline is new construction, of which approximately 35% has broken ground.
- During second-quarter 2023, the company awarded 179 new contracts for its legacy brands, an increase of 8% YOY. In July, it awarded 60 additional new contracts for its ECHO Suites Extended Stay by Wyndham brand to established and experienced developers, including what will be the brand’s first hotels in Canada. This brings the total number of contracts awarded for the brand to 265 since its launch, or nearly 33,000 rooms.
Full-Year 2023 Outlook
The company has refined its full-year outlook. It expects YOY rooms growth of 2% to 4%, YOY global RevPAR growth of 4% to 6%, free-related and other revenues of $1.38 billion to $1.41 billion, adjusted EBITDA of $654 million to $664 million and adjusted next income of $336 million to $348 million.
Tags: Geoff Ballotti, Quarterly Results, Wyndham Hotels & Resorts
