Wyndham Hotels & Resorts is counting on rate and net-unit growth to stay competitive and afloat amid the myriad headwinds still facing the hotel industry.
Wyndham reported its second-quarter numbers today and reported that it generated net income of $92 million and adjusted net income of $99 million, an increase of $24 million over the same time a year ago, reflecting higher adjusted EBITDA expense due to the sale of the company's owned hotels and lower expenses associated with the early extinguishment of debt.
During the earnings call Wednesday morning, CFO Michele Allen said the company’s global revenue per available room surpassed 2019 levels for the first time during the quarter, and average daily rate in all regions also exceeded 2019’s numbers. Global ADR for the quarter was up 117 percent year over year, but overall global occupancy was still only at 88 percent of 2019 levels, which Allen said illustrated “room for continued demand recovery.”
Adjusted EBITDA increased $7 million, or 4 percent from 2021, to $175 million, reflecting the revenue growth, which was partially offset by an $8 million impact from the sale of the company's owned hotels and the exit of its select-service management business as well as a $2 million “unfavorable timing impact” from the marketing fund.
Revenue Per Available Room
President and CEO Geoff Ballotti said domestic RevPAR for the quarter was 6 percent ahead of where it was in 2019. Worldwide, second-quarter RevPAR grew 23 percent globally in constant currency, including 15 percent growth in the U.S. and 59 percent growth internationally. The company estimated the increase is driven 80 percent by stronger pricing power and 20 percent by higher occupancy levels.
Ballotti told the investors that 99 percent of the company’s 9,000 hotels are now franchised, which limits Wyndham’s exposure to operating costs and capital requirements.
The company's global system grew 3 percent, reflecting 2 percent growth in the U.S. and 4 percent 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 7 percent and 12 percent, respectively. In total, Wyndham opened 6,300 rooms during the second quarter of the year.
The company is maintaining its goal of achieving a retention rate above 95 percent and its net room growth outlook of 2 to 4 percent for the full year 2022.
Wyndham’s pipeline grew for the eighth consecutive quarter. The company awarded 187 new contracts in Q2 this year compared to 154 in Q2 2021. Of those, 125 new contracts were for domestic developments, and the total accounts for more than 22,000 guestrooms.
As of June 30, the company's global development pipeline consisted of approximately 1,600 hotels and approximately 208,000 rooms, of which approximately 80 percent are in the midscale and above segments (nearly 70 percent in the U.S.). The pipeline grew 9 percent year over year, including 17 percent domestically and 5 percent internationally. Approximately 62 percent of the company's development pipeline is international and 78 percent is new construction, of which approximately 36 percent has broken ground.
Domestic development signings increased 77 percent, including 22 new-construction projects for the company's new (still unnamed) extended-stay brand, bringing the total number to 72 since its launch in March.
On May 24, the company completed the sale of the Wyndham Grand Rio Mar Resort in Puerto Rico for gross proceeds of approximately $62 million. There was no gain or loss on the sale as the proceeds approximated adjusted net book value. The company entered into a 20-year franchise agreement with the buyer.
Wyndham CFO Michele Allen said that based on the resort’s 2019 adjusted EBITDA, the sale price represents a 19-times multiple inclusive of plant capital expenditures.
Full-Year 2022 Outlook
The company is increasing its outlook as follows to reflect future projections related to the company's license fees from Travel & Leisure based on their full-year 2022 Gross VOI Sales outlook provided on April 28 as well as the impact of second quarter share repurchase activity.
Year-over-year rooms growth and RevPAR growth both are consistent with the prior outlook, but adjusted EBITDA is now $611-$631 million, up from $605-$625 million. As such, the company’s adjusted net income for the year is now $323-$334 million, up from $317-$329 million.