WYNDHAM HOTELS & RESORTS, INC. Q4 FY2024 earnings call

• Strong year-end performance: Achieved a 4% net room growth, with comparable adjusted EBITDA and EPS growing by 7% and 10% respectively. Opened a record 69,000 rooms, the highest annual organic room additions in Wyndham's history. The global retention rate improved to 95.7%. • Domestic performance: Net rooms saw sequential and year-over-year growth, with midscale and above brands up 4%. The ECHO Suites brand expanded to new markets, and the extended stay segment was bolstered by the launch of Wyndham Residences. U.S. RevPAR in Q4 grew by 5.3%, and excluding hurricane effects, it was 3.9%, with strong weekday performance driven by infrastructure bookings. • International performance: Net rooms grew 2% sequentially and 7% year-over-year. Regions like EMEA, Latin America, Southeast Asia and Pacific Rim, and China all experienced growth. The China direct franchising system grew 16% with over 60 openings. • Brand and marketing strategy: Royalty rates saw strong growth, with the portfolio being remixed to drive higher royalty rate hotels. Wyndham Rewards membership reached 114 million globally, and in the U.S., occupancy share was over one out of every two check-ins. Ancillary fees grew 6% due to the co-branded credit card program and new initiatives like Wyndham Connect.

In the fourth quarter, Wyndham generated $341 million in fee related and other revenues and $168 million in adjusted EBITDA. Fee related and other revenues increased 7% year-over-year, driven by higher franchise fees, system growth of 3.6%, RevPAR growth of 2.9% including currency effects, and a 19 basis point improvement in royalty rates globally. Adjusted EBITDA increased 12% on a comparable basis. For the full-year, fee related and other revenues were approximately $1.4 billion, an increase from the prior year. Adjusted EBITDA was $694 million, up 7% on a comparable basis. Net room growth for the year was 4%, with 69,000 rooms opened, the largest number of annual organic room additions in Wyndham's history. U.S. RevPAR in the fourth quarter grew by 5.3%, and excluding hurricane impact, it was 3.9%. Internationally, RevPAR grew 6% year-over-year in constant currency, with different regions showing varied growth rates.

• Global net room growth in 2025 is expected to accelerate to a range of 3.6% - 4.6%. • Global RevPAR growth is projected to be 2% - 3% in constant currency, with adjustments made for hurricane impact. • Fee related and other revenues are expected to be between $1.49 billion and $1.51 billion. • Adjusted EBITDA is anticipated to be between $745 million and $755 million, representing a year-over-year growth of 7% - 9%. • Adjusted net income is projected to be $369 million - $379 million, and adjusted diluted EPS is expected to be $4.66 - $4.78, an increase of 8% - 10%. • Free cash flow conversion before development advances is expected to range between 57% and 60%.

• Hurricane impact on RevPAR was adjusted out of the 2025 guidance. • Interest rate changes can affect key money investments and returns. • FX fluctuations may have an impact on international results.

Q: Brandt Montour asked about breaking down the net unit growth guidance between new construction, conversions, and retention improvement, and if it's pro rata similar in the U.S. versus international.

A: Michele Allen responded that the net room growth guidance has the low end anchored to 2024 performance with a 95.7% retention rate and gross openings of 7.9%. At the high end, retention is expected to improve by about 30 basis points and gross opens by 70 basis points. New construction will be a larger portion of net room growth in 2025, with the U.S. expected to improve and international continuing at or above 2024 levels.

Q: Michael Bellisario inquired about key money investments, specifically if higher returns are seen today and the dollars invested.

A: Michele Allen stated that the key money strategy is working, with more key money being deployed to attract higher FeePAR properties in strategic markets. Less than 20% of additions have key money, and those with key money have a 40% FeePAR premium. The '25 guidance is consistent with '24, with predominantly midscale and above space in the U.S. being the focus.

Q: Lizzie Dove asked about the pipeline FeePAR premium factoring into the guidance and how soon it flows through to results.

A: Michele Allen said the higher FeePAR strategy is part of the expectation for RevPAR outperformance, as brands typically outperform STR, and this higher FeePAR strategy contributes to that outperformance.

Q: David Katz questioned about the acceleration from 2025 to 2026 in the guidance.

A: Michele Allen explained that growth already accelerated in 2024, and the '25 outlook implies further acceleration. Momentum is expected to continue in 2026, with RevPAR growth cycles compounding growth.

Q: Patrick Scholes asked about the hurricane impact on RevPAR guidance.

A: Michele Allen said hurricane benefits were adjusted out of the 2025 RevPAR guidance, with the 2% - 3% constant currency growth reflecting trending excluding hurricane impact.

Q: Steven Pizzella asked about the RevPAR environment needed for the 8.5% EBITDA CAGR and ancillary fees in 2026.

A: Michele Allen replied that a RevPAR increase of 3% or better is needed in 2025, and 2026 ancillary fees are expected to be in the mid-teens range, ramping up economically in 2025.

Q: Dany Asad asked about China net room growth and retention rate.

A: Geoffrey Ballotti stated that higher FeePAR brands have higher retention rates. The China direct franchising system saw 16% net room growth in Q4 with strong openings and executions, and no slowdown is expected.

Q: Ian Zaffino inquired about the early performance of ECHO Suites.

A: Geoffrey Ballotti said ECHO Suites are ramping faster than anticipated in terms of ADR and occupancy, ahead of schedule with positive reports influencing other developers.

Q: Meredith Jensen asked about the booking window and length of stay.

A: Geoffrey Ballotti mentioned that length of stay has lengthened, leisure demand has strengthened, with weekend RevPAR up excluding hurricanes and strong midweek and weekend bookings.

Q: Dan Wasiolek asked about the infrastructure contribution to fee revenue and the impact of AI.

A: Geoffrey Ballotti said infrastructure spend is a significant revenue opportunity, and AI investment enables automation and better service for franchisees and customers.

Q: Alex Brignall asked about pipeline opportunities and owner relationships.

A: Geoffrey Ballotti stated that pipeline growth is strong organically, with upper upscale brands having higher retention rates. Owner relationships are enhanced by Wyndham Rewards and direct system benefits