Wyndham Hotels & Resorts Reports Strong First Quarter 2023 Result
Company Grows Development Pipeline by 11% and Global RevPAR by 12%; Raises Full-Year 2023 Outlook
PARSIPPANY, N.J., April 26, 2023 – Wyndham Hotels & Resorts (NYSE: WH) today announced results for the three months ended March 31, 2023. Highlights include:
Global RevPAR grew 12% compared to first quarter 2022 in constant currency.
S. RevPAR grew 4% compared to first quarter 2022.
System-wide rooms grew 4% year-over-year, including 1% of growth in the U.S. and 9% of growth internationally.
Development pipeline grew 11% year-over-year to 226,000 rooms, and signings increased 7%, excluding ECHO Suites Extended Stay by Wyndham.
Awarded 35 new construction projects for ECHO Suites Extended Stay by Wyndham, bringing the total number to 205 since launch in March 2022.
Returned $87 million to shareholders through $56 million of share repurchases and a quarterly cash dividend of $0.35 per share.
Company raises full-year 2023 outlook.
“Our impressive first quarter results demonstrate continued momentum with global RevPAR growth of 12%, net room growth of 4% and the 11th consecutive quarter of sequential growth in our development pipeline,” said Geoffrey A. Ballotti, president and chief executive officer. “We outperformed our adjusted EBITDA expectations, leading us to raise our full-year outlook as a result. With our seasonally strongest summer season on the horizon and no signs of slowdown in our middle-income guests’ desire to spend on travel, we’re enthusiastic about the opportunities that lie ahead and our ability to deliver outstanding value to our shareholders, guests, franchisees and team members.”
First Quarter Financial Results
The comparability of the Company’s first 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. The Company’s reported results and comparable-basis results (adjusted to neutralize these impacts) are presented below to enhance transparency and provide a better understanding of the results of the Company’s ongoing operations:
Note: Growth rates may not recalculate due to rounding; see Table 7 for a reconciliation of non-GAAP metrics.
(a) Includes estimated tax impact for the select-service management business, owned assets and marketing fund variability.
Fee-related and other revenues was $308 million compared to $316 million in first quarter 2022, which included $38 million from the Company’s select-service management business and owned hotels. On a comparable basis, fee-related and other revenues increased 11% year-over-year primarily reflecting global RevPAR growth of 9%, higher franchise fees and incremental license fees.
The Company generated net income of $67 million, or $0.77 per diluted share, compared to $106 million, or $1.14 per diluted share, in first quarter 2022. The decline in net income was primarily due to the sale of the Company’s owned hotels and the exit of its select-service management business, partially offset by higher adjusted EBITDA in the Company’s hotel franchising segment.
Adjusted EBITDA was $147 million compared to $159 million in first quarter 2022, which included a $15 million contribution from the Company’s select-service management business and owned hotels. On a comparable basis – which excludes the marketing fund variability – adjusted EBITDA increased 10% year-over-year reflecting higher fee-related and other revenues.
During first quarter 2023, the Company’s marketing fund expenses exceeded revenues by $4 million; while in first quarter 2022, the Company’s marketing fund revenues exceeded expenses by $7 million.
Full reconciliations of GAAP results to the Company’s non-GAAP adjusted measures for all reported periods appear in the tables to this press release.
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 10%, 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.
First quarter global RevPAR grew by 12% in constant currency compared to 2022 as the U.S. grew 4% and international grew 37%. Approximately two-thirds of this increase is driven by stronger pricing power, while the remainder is driven by higher occupancy levels.
On March 31, 2023, the Company’s global development pipeline consisted of approximately 1,800 hotels and 226,000 rooms, representing an 11% year-over-year increase, including 28% 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 and 80% is new construction, of which approximately 35% has broken ground.
During first quarter 2023, the Company awarded 123 new contracts for its legacy brands, an increase of 7% year-over-year, and 35 new contracts for its ECHO Suites Extended Stay by Wyndham brand, bringing the total number of contracts awarded for the brand to 205 since its launch. The pipeline includes over 25,000 rooms associated with the Company’s ECHO brand.
Cash and Liquidity
The Company generated net cash provided by operating activities of $93 million and free cash flow of $84 million in first quarter 2023. The Company ended the quarter with a cash balance of $150 million and approximately $890 million in total liquidity.
Share Repurchases and Dividends
During the first quarter, the Company repurchased approximately 790,200 shares of its common stock for $56 million.
The Company paid common stock dividends of $31 million, or $0.35 per share.
Full-Year 2023 Outlook
The Company is increasing its outlook as follows:
(a) Outlook represents global RevPAR growth of 6% to 8% compared to 2019.
(b) Represents the percentage of adjusted EBITDA that is expected to produce free cash flow.
Year-over-year growth rates are not comparable due to the sale of the Company’s owned hotels and the exit of its select-service management business, both of which occurred during 2022, as well as the variability in its marketing funds due to the support that the Company provided to its owners during 2020.
More detailed projections are available in Table 8 of this press release. The Company is providing certain financial metrics only on a non-GAAP basis because, without unreasonable efforts, it is unable to predict with reasonable certainty the occurrence or amount of all of the adjustments or other potential adjustments that may arise in the future during the forward-looking period, which can be dependent on future events that may not be reliably predicted. Based on past reported results, where one or more of these items have been applicable, such excluded items could be material, individually or in the aggregate, to the reported results.
Conference Call Information
Wyndham Hotels will hold a conference call with investors to discuss the Company’s results and outlook on Thursday, April 27, 2023 at 8:30 a.m. ET. Listeners can access the webcast live through the Company’s website at https://investor.wyndhamhotels.com. The conference call may also be accessed by dialing 800 267-6316 and providing the passcode “Wyndham”. Listeners are urged to call at least five minutes prior to the scheduled start time. An archive of this webcast will be available on the website beginning at noon ET on April 27, 2023. A telephone replay will be available for approximately ten days beginning at noon ET on April 27, 2023 at 800 695-0395.
Presentation of Financial Information
Financial information discussed in this press release includes non-GAAP measures, which include or exclude certain items. These non-GAAP measures differ from reported GAAP results and are intended to illustrate what management believes are relevant period-over-period comparisons and are helpful to investors as an additional tool for further understanding and assessing the Company’s ongoing operating performance. The Company uses these measures internally to assess its operating performance, both absolutely and in comparison to other companies, and to make day to day operating decisions, including in the evaluation of selected compensation decisions. Exclusion of items in the Company’s non-GAAP presentation should not be considered an inference that these items are unusual, infrequent or non-recurring. Full reconciliations of GAAP results to the comparable non-GAAP measures for the reported periods appear in the financial tables section of this press release.
About Wyndham Hotels & Resorts
Wyndham Hotels & Resorts (NYSE: WH) is the world’s largest hotel franchising company by the number of properties, with approximately 9,100 hotels across over 95 countries on six continents. Through its network of approximately 845,000 rooms appealing to the everyday traveler, Wyndham commands a leading presence in the economy and midscale segments of the lodging industry. The Company operates a portfolio of 24 hotel brands, including Super 8®, Days Inn®, Ramada®, Microtel®, La Quinta®, Baymont®, Wingate®, AmericInn®, Hawthorn Suites®, Trademark Collection® and Wyndham®. The Company’s award-winning Wyndham Rewards loyalty program offers approximately 101 million enrolled members the opportunity to redeem points at thousands of hotels, vacation club resorts and vacation rentals globally. For more information, visit www.wyndhamhotels.com. The Company may use its website as a means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD. Disclosures of this nature will be included on the Company’s website in the Investors section, which can currently be accessed at www.investor.wyndhamhotels.com. Accordingly, investors should monitor this section of the Company’s website in addition to following the Company’s press releases, filings submitted with the Securities and Exchange Commission and any public conference calls or webcasts.
This press release contains “forward-looking statements” within the meaning of the federal securities laws, including statements related to the Company’s current views and expectations with respect to its future performance and operations, including revenues, earnings, cash flow and other financial and operating measures, share repurchases and dividends and restructuring charges. The Company claims the protection of the Safe Harbor contained in the Private Securities Litigation Reform Act of 1995 for forward-looking statements. Forward-looking statements include those that convey management’s expectations as to the future based on plans, estimates and projections at the time the Company makes the statements and may be identified by words such as “will,” “expect,” “believe,” “plan,” “anticipate,” “intend,” “goal,” “future,” “outlook,” “guidance,” “target,” “objective,” “estimate,” “projection” and similar words or expressions, including the negative version of such words and expressions. Forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release.
Factors that could cause actual results to differ materially from those in the forward-looking statements include, without limitation, general economic conditions, including inflation, higher interest rates and potential recessionary pressures; the worsening of the effects from the coronavirus pandemic (“COVID-19”); COVID-19’s scope, duration, resurgence and impact on the Company’s business operations, financial results, cash flows and liquidity, as well as the impact on the Company’s franchisees, guests and team members, the hospitality industry and overall demand for and restrictions on travel the Company’s continued performance during the recovery from COVID-19 and any resurgence or mutations of the virus concerns with or threats of other pandemics, contagious diseases or health epidemics, including the effects of COVID-19; the performance of the financial and credit markets; the economic environment for the hospitality industry; operating risks associated with the hotel franchising businesses; the Company’s relationships with franchisees; the impact of war, terrorist activity, political instability or political strife, including the ongoing conflict between Russia and Ukraine; the Company’s ability to satisfy obligations and agreements under its outstanding indebtedness, including the payment of principal and interest and compliance with the covenants thereunder; risks related to the Company’s ability to obtain financing and the terms of such financing, including access to liquidity and capital; and the Company’s ability to make or pay, plans for and the timing and amount of any future share repurchases and/or dividends, as well as the risks described in the Company’s most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission and any subsequent reports filed with the Securities and Exchange Commission. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, subsequent events or otherwise, except as required by law.
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