Wyndham Hotels & Resorts, Inc. Q3 FY2025 earnings call

• Room openings increased 21%, deals signed 24% more, and global pipeline grew 4% to 257,000 rooms. - Ancillary fees saw an 18% growth in Q3, with year-to-date growth at 14%. - Introduced Wyndham Rewards Insider, a travel rewards annual subscription program. - Wyndham AI agents handled over 0.5 million customer interactions, driving faster service and higher booking conversion. - Internationally, net rooms grew 9%, with EMEA up 8%, Latin America and Caribbean up 4%, and China direct franchising up 16%.

In the third quarter, fee-related and other revenues were $382 million, with adjusted EBITDA at $213 million. RevPAR declined 5% globally and domestically due to consumer caution, but there were regional variations; parts of the Midwest saw RevPAR growth while Sunbelt states and Asia Pacific were softer. Ancillary fees grew 18% in Q3, driven by strategic partnerships, technology initiatives, and co-branded credit card program growth. Wyndham Rewards achieved a record 53% share of occupancy contribution for domestic hotels and 8% growth in global membership enrollments.

• Full-year constant currency global RevPAR expected to range between down 3% to down 2%. - Fee-related and other revenues now expected to be $1.43 billion to $1.45 billion, down $20 million to $40 million from prior outlook. - Adjusted EBITDA expected to be between $715 million and $725 million, down $15 million to $20 million from prior outlook. - Adjusted net income projected at $347 million to $358 million, and adjusted diluted EPS at $4.48 to $4.62.

• Macro environment challenges impacting RevPAR, especially in select service segments. - Timing issues with marketing fund expenses, now expected to exceed revenues by approximately $5 million. - Potential impacts of litigation defense and employee healthcare costs on financial results.

Q: Dan Politzer with JPMorgan asked about the challenging RevPAR environment, specifically what's in control and out of control.

A: Geoffrey Ballotti responded on structural indicators like booking lead times, length of stay, and cancellation rates being positive, and discussed actions to help franchisees like urging them to hold rates appropriately.

Q: Brandt Montour of Barclays asked about infrastructure-related travel demand and government spending curtailment.

A: Geoffrey Ballotti mentioned infrastructure as a multiyear tailwind but noted some projects paused, while private investment in reshoring and data centers is a positive offset.

Q: Dany Asad of Bank of America asked about U.S. RevPAR trends in Q4.

A: Michele Allen said early trends in CA, TX, FL were encouraging, with stabilization in booking pace and Oktoberfest in Germany positive, but rest of portfolio in line with Q3 results.

Q: David Katz of Jefferies asked about net unit growth.

A: Geoffrey Ballotti said net room growth outlook is positive, with 9% more rooms opened YTD, pipeline up 4%, and strong growth in higher fee segments both domestically and internationally.

Q: Michael Bellisario of Baird asked about franchise fees and G&A cuts.

A: Michele Allen explained franchise fees include variable items like termination fees, and G&A cuts this year with some expected permanent to margin and others temporary for 2025.

Q: Steven Pizzella of Deutsche Bank asked about ancillary revenue growth.

A: Michele Allen discussed credit card growth, replatforming, international expansion, and excitement about Wyndham Insider, with Geoffrey adding on sourcing initiatives benefiting franchisees.

Q: Elizabeth Dove of Goldman Sachs asked about key money deals and China mix.

A: Michele Allen said key money is accretive, and Geoffrey noted strong net room growth in China without key money, with 52 new deals in Q3.

Q: Stephen Grambling of Morgan Stanley asked about AI and indirect channels.

A: Geoffrey Ballotti discussed leveraging AI to reduce OTA dependency, optimizing brand.com sites in LLM searches, and using partnerships with LLMs to access hotel info directly.

Q: Ian Zaffino of Oppenheimer asked about Wyndham Rewards Insider.

A: Geoffrey Ballotti and Michele Allen discussed the potential of Insider to enhance Wyndham Rewards value, with focus on proving the model and long-term fee growth.

Q: Alex Brignall of Redburn asked about marketing expense overspend and RevPAR gaps.

A: Michele Allen said marketing overspend is an investment with expected recovery, and Geoffrey discussed RevPAR recovery potential with upcoming events like FIFA World Cup and America 250.

Q: Meredith Jensen with HSBC asked about shadow supply and Wyndham's view.

A: Geoffrey Ballotti discussed using AI, reputation, and guest reviews to address shadow supply challenges through improved confidence and frequent feedback.