After a third quarter in which Wyndham Hotels & Resorts exceeded pre-pandemic rooms revenue at its U.S. properties, executives have a more positive outlook on the company's 2021 performance.
Wyndham reported revenue per available room at its U.S. hotels was up 7% from 2019 in the third quarter, compared to declines of 5% in the second quarter and 25% in the first quarter.
Comparisons to 2019 — when the hotel industry at large had one of its best years on record prior to the start of the COVID-19 pandemic — are meant to reflect normal performance. Wyndham Chief Financial Officer Michele Allen said RevPAR overall has recovered to 97% of 2019 levels led by the company's economy brands, which exceeded 2019 RevPAR during the quarter by 14%. Midscale hotels surpassed 2019 RevPAR levels by 4% in the quarter.
Hotel occupancy in the U.S. trailed 2019 levels by only 2% during the quarter.
"In fact, our economy brands drove occupancy to 103% of 2019 levels, our midscale brands were at 94%, and our higher-end chain-scale brands with a heavier urban concentration average 76% [occupancy]," Allen said, adding this trend continued into October.
As a result, U.S. hotels achieved average daily rates that were 10% higher than they were in the same quarter in 2019.
Demand for the company's hotels, particularly in the U.S., is driven by continued strength in leisure travel, as well as business travel in the construction, utility and trucking industries, President and CEO Geoff Ballotti said.
"The industry, all of us, were positively surprised as kids went back to school ... to see that trend continue" with leisure travel, Ballotti said. "I mean, it just keeps getting better. ... The demand is out there, despite being out of the peak leisure season ... [and] our infrastructure, construction and transportation business just keeps chugging along, and we do not expect that to slow down at all."
Wyndham's executives also expressed confidence that performance outside of the U.S. will normalize back to 2019 levels and above as travel restrictions related to the pandemic continue to lift around the world.
"It's been true throughout the pandemic that ... as travel restrictions are opening up or easing, RevPAR comes back quickly. It was great to see Europe, Canada and Latin America this quarter all gaining more than 20 points [in RevPAR]," Ballotti said.
RevPAR at the company's China hotels, meanwhile, is "nearly 90% of 2019 levels," he said.
"The best example out there is Canada. [RevPAR] was down 40% before; it's down 10% in September; and in October, it's running month-to-date ahead of where it was in October [2019]," he added.
This improvement, as well as "strong developer interest" in Wyndham's brands, according to Ballotti, was a driving force behind its updated full-year outlook, which according to a company earnings release projects:
- Net rooms growth of 1.5% to 2%, versus prior outlook of 1% to 2%.
- RevPAR growth of approximately 43% versus 2020, or a decline of approximately 14% compared to 2019, which is improved from growth of approximately 40% versus 2020, or a decline of approximately 16% compared to 2019.
- Fee-related and other revenues of $1.21 billion to $1.23 billion, up from $1.16 billion to $1.19 billion.
- Adjusted earnings before interest, taxes, depreciation and amortization of $560 million to $570 million, up from $525 million to $535 million.
- Adjusted net income of $275 million to $285 million, up from $244 million to $254 million.
"These results have been fueled by the many investments we made over the last two years to capture an increasing share of both leisure and everyday business travel," Ballotti said in the company's earnings release.
Wyndham also announced on Oct. 5 the launch of upper-midscale, all-inclusive brand Alltra, which will debut in the Caribbean and expand globally.
Third Quarter Results
Outside of the U.S., RevPAR in the third quarter was down 25% from 2019, which the company said in its earnings release "demonstrates strong sequential progress from a 44% decline in the second quarter led by growth in regions where travel restrictions subsided." RevPAR was down 17% in Canada, an improvement of 32 percentage points, and down 25% in Europe, the Middle East and Africa, representing a 43-point improvement.
Compared to the third quarter of 2020, Wyndham's net income for the quarter was $103 million, compared to $27 million in the third quarter of 2020. Adjusted EBITDA was $194 million, compared to $103 million in the third quarter of 2020.
The company signed 151 properties to its brands in the third quarter — 3% more than during the same period in 2019 — and has more than 1,450 hotels representing approximately 193,000 rooms in its development pipeline. Room openings in the quarter also exceeded 2019 levels by 4%.
"Developer interest in our brands is strong," Ballotti said. "Our pipeline grew another 440 basis points and is now at pre-pandemic levels. At the same time, our teams opened over 50% more rooms than we opened last year, and more rooms than we opened in the third quarter of 2019."
Conversions of existing hotels are driving net unit growth for the company, but new construction is also continuing at a strong pace, despite global supply-chain issues, Ballotti said.
The company had "just a monster quarter on executions, especially when it comes to conversions. Our franchise sales development teams around the world awarded over 100% more conversion rooms domestically than in 2019 and 20% more internationally than in 2019," he said.
Wyndham opened 27 new-build hotels and awarded 70 construction contracts in the third quarter, "which was right about on the same level that we opened or awarded back in the third quarter of 2019," Ballotti said, adding "over half of these deals are being signed with existing franchisees."
"This is the first time we've had over 1,000 hotels in our new-construction pipeline. That's up 6% or 60 hotels from last year. Another 15 broke ground this quarter, which is up 30% from last year," he added.
As of press time, Wyndham Hotels & Resorts’ stock was trading at $82.95, up 42% year to date. The S&P 400 MidCap Index was up 22.3% for the same period.