During an earnings call with investors, Wyndham Hotels & Resorts President and CEO Geoff Ballotti announced that the company opened more than 17,000 rooms, bringing its year-to-date total to more than 48,000 rooms globally, up 13 percent compared to a year ago.
System Size and Development
The company’s global system grew 4 percent, reflecting 1 percent growth in the U.S. and 8 percent internationally. Net rooms grew 2 percent quarter over quarter and 8 percent year over year. These increases included 3 percent growth in the midscale and above segments in the U.S., as well as 11 percent growth each in the company’s Europe, Middle East and Asia and Latin America regions.
As of the end of September, the company’s global development pipeline consisted of approximately 2,100 hotels and 248,000 rooms, representing another record-high level and a 5 percent year-over-year increase.
Key highlights include:
- 7 percent growth in the U.S. and 3 percent internationally
- 17th consecutive quarter of sequential pipeline growth
- Approximately 70 percent of the pipeline is in the midscale and above segments, which grew 6 percent year-over-year
- Approximately 58 percent of the pipeline is international
- Approximately 79 percent of the pipeline is new construction and approximately 35 percent of these projects have broken ground
- During the third quarter of 2024, the company awarded 197 new contracts, including 95 contracts in the U.S., which increased 10 percent year-over-year.
Approximately 14 percent of Wyndham’s pipeline represents ECHO Suites Extended Stay by Wyndham for which the company has awarded a total of 283 contracts since its launch. “We awarded another 10 new ECHO Suites contracts this quarter,” Ballotti said during the call, and noted that these deals are with new institutional development groups who have not done new construction deals with Wyndham previously,
Revenue
Third-quarter global revenue per available room increased 1 percent in constant currency compared to 2023, reflecting a 1 percent decline in the U.S. and 7 percent growth internationally.
In the U.S., RevPAR for the company’s midscale and above segments was unchanged year-over-year while RevPAR for its economy segment declined 2 percent, reflecting a modest acceleration from the second quarter with a sequential improvement of 10 basis points. Additionally, the company’s U.S. economy brands gained 50 basis points of market share in the quarter, driven by performance in oil and gas markets, which grew 250 basis points in the quarter, and in the five states with the highest infrastructure bill spend, which collectively grew 80 basis points. U.S. occupancy remained consistent.
Internationally, RevPAR for the company’s EMEA, Latin America and Canada regions collectively increased 13 percent due to both continued pricing power, with average daily rate up 11 percent, and occupancy growth of 2 percent. RevPAR for the company’s Asia Pacific region declined 7 percent, driven by a 2 percent decrease in occupancy and a 5 percent decrease in ADR. Importantly, the third quarter RevPAR performance for APAC represented a 500 basis point sequential improvement.
The Infrastructure Effect
Ballotti noted “positive momentum” in infrastructure-related business. “Weekday performance outpaced weekends, with RevPAR growing about a point driven by higher demand,” he said. “This includes an improvement of 250 basis points across our oil and gas markets and sustained year-over-year growth in the five states that have received significant infrastructure funding to date: Texas, California, New York, Illinois and New Mexico.” Wyndham properties in these markets secured an additional 300 basis points of weekday demand share across select-service chain scales during the quarter. “We're encouraged by these results, and we're also encouraged that our brands continue to maintain pricing power,” Ballotti said, noting that domestic average daily rates “held steady” throughout the quarter at 17 percent above pre-pandemic levels, which still trails real inflation growth. This, he added, suggests that pricing can continue to be flexed in the years ahead. “We continue to believe the infrastructure strength we saw in the third quarter, coupled with more favorable comparisons ahead in the fourth quarter, will provide positive domestic RevPAR momentum as we exit 2024.”
Wyndham is seeing a double-digit uptick in leads from companies bidding on federal infrastructure work, Ballotti continued, noting a 15 percent increase in corporate contracted accounts with which the company’s sales teams are contracting. “That is what has been growing our share gain,” he said. “Combined infrastructure lifted our overall domestic weekday RevPAR by 100 basis points. Occupancy was most of it, and demand is everywhere.”
Ballotti emphasized that the effects of the combined Infrastructure Investment and Jobs Act, CHIPS and Science Act and Inflation Reduction Act may not be seen for a while. He calculated that of the $1.2 trillion included in the bill, only $400 billion has been allocated so far and only $300 billion officially announced. “It is a very meaningful multiyear driver for our franchisees over the next 10, 10-plus years,” he said. “And even beyond that, there's still another $100 billion of annual infrastructure spending ongoing. … We're capturing an outside share of that.”
Third Quarter Operating Results
The company generated net income of $102 million compared to $103 million in third quarter 2023. The decrease was primarily reflective of higher interest expense, partially offset by higher adjusted earnings before interest, taxes, depreciation or amortization.
Adjusted EBITDA grew 4 percent to $208 million compared to $200million in third quarter 2023. This increase included a $5 million unfavorable impact from marketing fund variability, excluding which adjusted EBITDA grew 7 percent on a comparable basis, primarily reflecting higher royalties and franchise fees, increased ancillary revenues and margin expansion.
Full-Year 2024 Outlook
The company expects to achieve its net room growth outlook of 3 to 4 percent for the full year, and left its forecast for the remainder of the year largely unchanged in terms of rooms, revenue and EBITDA growth.