Wyndham Hotels & Resorts is on track to launch its first extended-stay brand for the economy segment later this spring. President and CEO Geoff Ballotti announced the new brand during the company's investor call to discuss fourth-quarter and full-year 2021 results.
The segment, he said, has proven itself to be both “recession- and pandemic-proof,” and demand for more extended-stay options is growing: “We've seen, in our upper-midscale extended-stay brand, Hawthorn Suites, a 50 percent increase in our pipeline over the last year and we know that demand is up there for an extended-stay economy brand.”
The company assembled a council of extended-stay developers to help determine the new brand’s design, room counts, operational processes and to figure out a prototype that they would want to build themselves. The brand's name has not been announced at this point.
The brand, he added, would have a price point on par with Extended Stay America and Choice Hotels International’s extended-stay brands. CFO Michele Allen said the company would “put a good amount of capital to work” on rolling the brand out. “We are very interested in committing to the brand for long-term success,” she said.
The company expects an 18- to 24-month timeline to develop each property.
Q4 and Year-End
For the fourth quarter of the year, Wyndham reported U.S. revenue per available room growth from 2019 of 9 percent, up 58 percent from 2020. International RevPAR declined 19 percent, while global RevPAR recovered to 100 percent of 2019 levels. The company credits the 9 percent increase in the U.S. to pricing power, as average daily rate exceeded 2019 levels by 8 percent. The 19 percent international decline demonstrates sequential progress from a 25 percent decline in the third quarter.
The company generated net income of $48 million in the quarter, an increase of $55 million, reflecting an increase in adjusted earnings before interest, taxes, depreciation and amortization and lower net interest expense. Adjusted EBITDA for the quarter was $131 million, an increase of 126 percent versus 2020. The increase of $73 million reflects the increase in fee-related and other revenues and lower excess marketing spend, partially offset by higher volume-related expenses due to the ongoing recovery in travel demand.
Wyndham’s global system grew 180 basis points, reflecting 70 basis points of growth in the U.S. and 350 basis points of growth internationally. As expected, these increases included growth in both the higher RevPAR midscale and above segments in the U.S. and the direct franchising business in China, which grew 5 percent and 15 percent, respectively. Fourth quarter room openings recovered to 97 percent of 2019 levels globally reflecting a 21 percent increase in domestic additions. The company also achieved its goal of a 95 percent retention rate for the full year 2021.
Global and international RevPAR began to lap the onset of the COVID-19 pandemic in January 2021, while the U.S. began to lap its onset in March 2021. As such, comparisons to 2019 (on a two-year, constant currency basis) are more meaningful when evaluating trends.
Development
The company awarded 655 new contracts in 2021 representing over 82,000 rooms, including nearly 590 direct franchise management agreements, 12 percent more than 2019. On Dec. 21, the company’s global development pipeline grew more than 5 percent to more than 1,500 hotels and more than 194,000 rooms, 24 percent of the current system size and the highest level on record. The pipeline grew 5 percent year-over-year, including 3 percent domestically and 6 percent internationally. Approximately 65 percent of the company’s development pipeline is international and 79 percent is new construction, of which approximately 35 percent has broken ground. Over 80 percent of the global development pipeline is in the midscale and above segments, including over 70 percent in the U.S.
During the fourth quarter of 2021, the company decided to pursue the sale of its two owned hotels. As of Dec. 21, the assets and liabilities of these owned hotels were reported in assets held for sale and liabilities held for sale on the consolidated balance sheet. As a result of the plan to sell these owned hotels, in the fourth quarter of 2021, the company recorded a noncash impairment charge of $6 million to reflect the expected value upon potential sale.
Full-Year Outlook
The company provided the following outlook for full-year 2022:
- Net rooms growth of 2 percent to 4 percent.
- RevPAR growth of 12 percent to 16 percent versus 2021, which is consistent with 2019 levels.
- Fee-related and other revenues of $1.34 billion to $1.37 billion, a year-over-year increase of 8 percent to 10 percent.
- Adjusted EBITDA of $605 million to $625 million, which is consistent with 2019 levels, and reflects a year-over-year increase of 3 percent to 6 percent.
- Adjusted net income of $308 million to $320 million, which is consistent with 2019 levels, and reflects a year-over-year increase of 4 percent to 8 percent.
- Free cash flow conversion from adjusted EBITDA of approximately 55 percent.