In the company's earnings call with investors, Wyndham Hotels & Resorts President and CEO Geoffrey A. Ballotti called 2022 “an outstanding year” for the company. “Our [fourth quarter 2022] results finished stronger than our expectations, with full-year reported global [revenue per available room] growth of over 15 percent, net room growth of 4 percent and adjusted [earnings before interest, taxes, depreciation and amortization] of $650 million,” he said. The company’s full-year EBITDA outlook had been $636-$644 million.
System Size
The company's global system grew 4 percent, reflecting 1 percent growth in the U.S. and 9 percent growth internationally. 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 4 percent and 10 percent, respectively, as well as 80 basis points of growth globally and 200 basis points internationally from the acquisition of the Vienna House brand in September.
The company also achieved its goal of a retention rate above 95 percent for the full year.
Revenue and Income
Fourth quarter global RevPAR grew by 15 percent in constant currency compared to 2021, reflecting 5 percent growth in the U.S. and 46 percent internationally. Global RevPAR was 116 percent of 2019 levels in constant currency, with the U.S. at 115 percent and international at 123 percent. The increases compared to both 2021 and 2019 were driven primarily by stronger pricing power, the company said.
On a comparable basis, adjusted EBITDA increased 6 percent year over year reflecting higher fee-related and other revenues, partially offset by an unfavorable timing impact from the marketing fund and the inflationary impact on expenses, both of which were anticipated.
In Q4, the company generated net income of $56 million, compared to $48 million in fourth quarter 2021. The increase in net income was primarily due to higher adjusted EBITDA in the company's hotel franchising segment, partially offset by the impact from the exit of the company's select-service management business and owned hotels. Adjusted EBITDA was $126 million compared to $131 million in fourth quarter 2021, which included a $12 million contribution from the company's select-service management business and owned hotels—both of which were exited in the first half of 2022.
Full-year global RevPAR grew 20 percent year-over-year in constant currency, and U.S. RevPAR grew 12 percent.
The company generated net income of $355 million compared to $244 million in full-year 2021. The increase in net income was primarily due to higher adjusted EBITDA in the company's hotel franchising segment and lower net interest expense, partially offset by the impact from the exit of the company's select-service management business and owned hotels. Adjusted EBITDA was $650 million compared to $590 million in full-year 2021. The company's select-service management business and owned hotels—both of which were exited in the first half of 2022—contributed $18 million and $37 million during 2022 and 2021, respectively. On a comparable basis, adjusted EBITDA increased 14 percent year-over-year reflecting higher fee-related and other revenues, partially offset by the inflationary impact on expenses.
Development
In the year, Wyndham grew its development pipeline sequentially by 3 percent and by 12 percent over the previous year to a record 219,000 rooms in 1,700 hotels. “This marks Wyndham's 10th consecutive quarter of sequential pipeline growth,” Ballotti said.
Similarly, the company awarded 882 contracts globally for more than 113,000 room additions in 2022, which Ballotti noted is three new contracts awarded every business day. In terms of domestic growth, the number of domestic contracts signed in the fourth quarter was 40 percent higher than what was awarded last year, and nearly 90 percent higher than in the fourth quarter of 2019.
For the full year, Wyndham signed 563 contracts in the U.S. for 62,000 room additions, nearly double the amount signed in 2019 and 65 percent more than last year.
As of year-end, the company's global development pipeline consisted of over 1,700 hotels and approximately 219,000 rooms, of which approximately 73 percent is in the midscale and above segments (56 percent in the U.S.). The pipeline grew 12 percent year-over-year, including 34 percent growth in the U.S. Approximately 60 percent of the company’s development pipeline is international and over 80 percent is new construction, of which approximately 36 percent has broken ground.
The pipeline includes 170 new contracts awarded for the company's Echo Suites Extended Stay by Wyndham brand, which was first announced a year ago during the Q4/full-year 2021 call. In line with development expectations, the first three Echo Suites hotels broke ground in 2022 and are slated to open in the second half of 2023. The company, Ballotti noted, has not yet offered Echo to its thousands of individual franchisees—“which we expect to do later this year.”
Like Patrick Pacious, Choice Hotels International’s president and CEO, during his company's earnings call, Ballotti did not express much concern about increased competition in the economy space from companies like Hilton. “We have the most recognized economy brands in the space, and we've been in this space for over 30 years,” he said. “We'll continue to provide the most flexible and the most competitively priced economy brands, with a focus on what we know is important to our guests and we also know is important to our owners.” The company’s renovation and property improvement plan costs run three to five times less than many of the larger brands, he claimed, and Wyndham’s technology stack installation and operating costs “remain the lowest” at four to six times less.
Forecast
For full-year 2023, the company expects room growth of 2-4 percent, year-over-year global RevPAR growth of 4-6 percent, adjusted net income of $337-349 million and adjusted EBITDA of $650-660 million.