Wyndham Hotels & Resorts announce strong Q2 results

Wyndham Hotels & Resorts has announced the Q2 results that ended June 30, 2024. The results for the second quarter showcased strong results for the company as the development pipeline and system size grew by 7 per cent and 4 per cent respectively.

Geoff Ballotti, President and Chief Executive Officer, stated, “The resilience and highly cash-generative nature of our business model was once again on full display this quarter. Amid a normalising domestic RevPAR environment, we delivered strong adjusted EBITDA driven by net room and ancillary fee growth. We awarded 33 per cent more hotel contracts domestically which grew our development pipeline to a record 245,000 rooms, and drove significant increases in our US, international and global royalty rates. Year-to-date, we’ve returned over $250 million to shareholders, representing 4 per cent of our beginning market capitalisation this year.”

The company’s global system grew 4 per cent, reflecting 1 per cent growth in the US and 8 per cent internationally. These increases included 3 per cent growth in the higher RevPAR midscale and above segments in the US, as well as strong growth in the company’s two highest international RevPAR regions, EMEA and Latin America, which grew 12 per cent and 11 per cent, respectively. The company continued to improve its retention rate and remains solidly on track to achieve its net room growth outlook of 3-4 per cent for the full year 2024.
On June 30, 2024, the company’s global development pipeline consisted of approximately 2,000 hotels and 245,000 rooms, representing another record-high level and a 7 per cent year-over-year increase.  

The second quarter global RevPAR increased 2 per cent in constant currency compared to 2023, reflecting flat growth in the US and 7 per cent growth internationally. In the US, the company’s midscale and above segments grew RevPAR 2 per cent year-over-year while RevPAR for its economy segment declined 2 per cent. Overall, US RevPAR results were driven by a growth of 90 basis points in occupancy, partially offset by a decline of 50 basis points in ADR. Importantly, RevPAR growth in the US accelerated during the second quarter, improving 520 basis points sequentially, including an improvement of 560 basis points for its U.S. economy brands.

Internationally, RevPAR for the company’s Latin America, EMEA and Canada regions collectively increased 15 per cent due to both continued pricing power, with ADR up 13 per cent, and occupancy growth of 2 per cent. RevPAR for the company’s APAC region declined 12 per cent primarily due to a difficult year-over-year comparison resulting from that region’s Covid recovery timing in the second quarter of 2023. APAC occupancy declined 7 per cent and ADR declined 5 per cent.

Compared to 2019, the company more than doubled the RevPAR for its Latin America, EMEA and Canada regions, while RevPAR for its APAC region continued to lag in 2019 by 11 per cent. Fees-related and other revenues were $366 million compared to $358 million in the second quarter of 2023, reflecting global net room growth of 4 per cent and a 6 per cent increase in ancillary revenue streams.

The company generated a net income of $86 million compared to $70 million in the second quarter The increase was primarily reflective of higher adjusted EBITDA, a benefit in connection with the reversal of a spin-off related matter and a lower effective tax rate, partially offset by higher interest expense and restructuring costs. Adjusted EBITDA grew 13 per cent to $178 million compared to $158 million in the second quarter of 2023.

Adjusted diluted EPS grew 22 per cent to $1.13 compared to $0.93 in the second quarter of 2023. This increase included $0.09 per share related to expected marketing fund variability (after estimated taxes). On a comparable basis, adjusted diluted EPS increased 12 per cent year-over-year reflecting comparable adjusted EBITDA growth and the benefit of share repurchase activity partially offset by higher interest expense.

During the second quarter of 2024, the company’s marketing fund expenses exceeded revenues by $5 million, in line with expectations; while in the second quarter of 2023, the company’s marketing fund expenses exceeded revenues by $15 million, resulting in $10 million of marketing fund. The company continues to expect marketing fund revenues to equal expenses during the full-year 2024. It also generated $1 million of net cash provided by operating activities and generated an adjusted free cash flow of $69 million in the second quarter of 2024. The company ended the quarter with a cash balance of $70 million and approximately $820 million in total liquidity.

During the second quarter, the company repurchased approximately 1.8 million shares of its common stock for $131 million. Year-to-date through June 30, the company repurchased approximately 2.6 million shares of its common stock for $188 million. The company paid common stock dividends of $31 million, or $0.38 per share, during the second quarter of 2024 and $63 million, or $0.76 per share, year-to-date. The reduction in RevPAR and fee-related and other revenues reflects a more moderated RevPAR acceleration than previously anticipated. The reduction in adjusted net income represents an increase in interest expense due to the upsizing of the company’s term loan B. This impact was more than offset in adjusted diluted EPS by second-quarter share repurchase activity.

Year-over-year growth rates for adjusted EBITDA, adjusted net income and adjusted diluted EPS are not comparable due to full-year 2023 marketing fund revenues exceeding expenses by $9 million, which substantially completed the recovery of the $49 million support the Company provided to its owners during Covid19.