With hotel revenues already exceeding pre-pandemic levels entering 2022, Wyndham Hotels & Resorts is building on that success by ramping up growth of its hotel pipeline and planning to launch a new extended-stay brand in the economy segment this spring.
The company has more hotels and rooms in its development pipeline than ever in its history — 1,500 hotels representing more than 194,000 rooms as of Dec. 31, 2021, according to a news release announcing fourth quarter and full-year 2021 earnings.
The development pipeline grew 5% year over year, led by international projects, up 6% compared to a 3% increase in the U.S. Approximately 79% of the company's new hotel construction is international, and 35% of those projects have broken ground.
Of the Wyndham hotels under development globally, 80% are in the midscale segment and above. In the U.S. alone, 70% of the projects are midscale and above.
The launch of a new extended-stay, economy hotel brand is expected to boost development prospects for the company.
Wyndham President and CEO Geoff Ballotti said the brand has been in the design and consultation phase over the past year.
"Extended-stay [hotel] demand has proven to be absolutely recession- and pandemic-proof, and we know that demand is growing," he said.
"We've seen, in our upper-midscale, extended-stay brand Hawthorne Suites a 50% increase in our pipeline over the past year and we know that demand is out there for an extended-stay economy brand. Our developers are asking for an economy extended-stay brand, our franchisees are asking for it, and most importantly our corporate accounts are asking for it."
Part of that demand will come from more than "10 million construction workers out there that travel every day," he said, "and those are our customers."
Ballotti said developer interest is strong, indicating the brand concept is "more popular than our other new-construction prototypes."
The company signed 655 new contracts with franchisees in 2021 and grew its global portfolio by 180 basis points, reflecting an increase of 70 basis points in the U.S. and 350 basis points outside of the U.S.
Room openings in the fourth quarter were at 97% of 2019 levels globally — driven by a 21% increase in U.S. room openings — and the company had a 95% rooms retention rate for the full year.
As of Dec. 31, 2021, Wyndham had 810,100 rooms in its global portfolio — 490,600 of which were in the U.S. In the fourth quarter, the company opened 9,900 rooms. Conversions of existing hotels was up more than 35% in the quarter compared to 2019.
"We introduced 11 of our 22 brands into 18 new countries and territories, strengthening our foundation for future franchise growth in those regions, including our first Registry Collection hotels in Mexico and Panama, our first Trademark hotels in New Zealand and Fiji and our first La Quinta hotel in the United Arab Emirates," Ballotti said.
According to the company earnings release, Wyndham decided in the fourth quarter to pursue the sale of its two owned hotels — the Wyndham Grand Bonnet Creek Resort in Orlando and the Wyndham Grand Rio Mar resort in Puerto Rico — and "recorded a non-cash impairment charge of $6 million to reflect the expected value upon potential sale."
Ahead in the Recovery
The ramp-up of hotel development shows the confidence Wyndham executives have in the recovery of the hotel industry and the company's portfolio from the pandemic-driven demand crisis, which reached its deepest depths in 2020.
While hotels in some markets around the world continued to struggle throughout 2021, Wyndham's portfolio benefited from drive-to leisure demand, particularly in the U.S., which was not deterred by the spread of new COVID-19 variants, according to Ballotti.
Each month of the fourth quarter showed sequential performance improvement, he said.
U.S. hotel revenue per available room exceeded 2019 levels by 9% in the quarter, and increased 58% over the same quarter in 2020. Global RevPAR reached 100% of 2019 levels, despite a 19% decline outside of the U.S., which also was a sequential improvement from the third quarter when RevPAR outside of the U.S. was down 25%.
For the full year, global RevPAR recovered to 88% of 2019 levels on a constant currency basis. In the U.S., RevPAR was 97% of what it was for full-year 2019.
Wyndham Chief Financial Officer Michele Allen said 72% of the U.S. markets in which the company has hotels outpaced 2019 occupancy levels in the fourth quarter, led by national park and beach destinations.
"All international regions experienced significant sequential improvement from the third quarter despite COVID spikes and new variants," she added.
Performance for the company's hotels in Canada improved to 91% of 2019 levels in the fourth quarter, up from 83% in the third quarter. Its hotels in the Europe, Middle East and Africa region performed at 84% of 2019 levels, an index improvement of 9% over the third quarter.
"Recovery in China continued to moderate during the fourth quarter at 77% of 2019 levels, as a result of sustained lockdowns, and we anticipate that this trend will continue until restrictions are once again lifted following the Beijing Olympics," Allen said.
The company cited pricing power as the primary reason for the RevPAR growth, noting average daily rate exceeded 2019 levels by 8% in the quarter. Ballotti said the upcoming spring break travel season is expected to be "very busy" for Wyndham franchisees.
"On top of the overall pricing power that our leisure-oriented hotels have been experiencing, our brands have gained nearly 300 basis points of ADR index since the start of the pandemic as we've introduced new pricing tools and increased franchisee education on how to forecast more accurately, how to price more competently and how to achieve greater profitability," Ballotti said.
For full-year 2022, Wyndham projects it will add 2% to 4% in net rooms to its portfolio, and grow RevPAR by 12% to 16% over 2021, which would put that metric in line with 2019 levels. The company is also projecting adjusted earnings before interest, tax, depreciation and amortization between $605 million and $625 million, consistent with 2019 levels and a 3% to 6% gain over 2021.
Wyndham reported $131 million in adjusted EBITDA in the fourth quarter of 2021, up 126% over the fourth quarter of 2020. For full-year 2021, adjusted EBITDA was $590 million, an increase of 76% and more than $250 million compared to 2020 and 5% below 2019.
Net income in the fourth quarter was $48 million, compared to a loss of $7 million in the same quarter of 2020. Net revenues were $392 million, compared to $296 million in 2020. For full-year 2021, net income was $244 million, compared to a loss of $132 million in 2020; and net revenues were $1.6 billion, compared to $1.3 billion in 2020.
As of press time, Wyndham Hotels & Resorts’ stock was trading at $91.13, up 1.6% year to date. The S&P 400 MidCap Index was down 156% for the same period.