Wyndham Hotels & Resorts continued its focus on system growth in the first quarter, as its U.S. and international hotel pipelines expanded, largely due to conversions.

The company signed 112 development contracts in the first quarter, which is in line with previous first quarter signings — 112 in 2020 and 124 in 2019. Its development pipeline consists of 187,000 rooms at approximately 1,400 hotels — approximately 64% of which are international and 75% of which are new-construction. A third of new-build hotels in the pipeline have broken ground, according to a company earnings release.

Wyndham President and CEO Geoff Ballotti said conversions of existing hotels to Wyndham brands accounted for 70% of openings in the quarter.

Conversions in the quarter included the Hotel Avenue Louise Brussels in Europe and the all-inclusive Kunuku Aqua Resort in Curacao to the Trademark brand, and the full-service Wyndham Xinyang Downtown in Xinyang, Hunan, China.

"In addition to our team's ability to convert 52 hotels to Wyndham brands in the quarter, we saw 17 hotels under construction in the fourth quarter progress to opening, including our fifth new-construction Microtel to open in Tianjin, China, which was also the first of seven new-build Microtel hotels our China team expects to open this year, bringing our Microtel by Wyndham brand to 11 direct franchise hotels in total in a country where we introduced the brand only two short years ago," Ballotti said.

Wyndham's global hotel portfolio grew by 20 basis points in the first quarter to 797,200 rooms, "reflecting strong growth in the company's direct-franchising business in China, primarily offset by the impact from supply-chain delays on new-construction openings in the United States," according to the earnings release.

The company's international portfolio grew by 80 basis points in the quarter, compared to a 30-basis-point decline in U.S. system size.

Room terminations also "normalized" in the quarter, according to the company, and were 34% lower than terminations in the first quarter of 2019. About one half of 1% of Wyndham's hotels in the U.S. went into foreclosure, and the company is on track to raise its hotel retention rate back to 95% this year, Ballotti said.

"We're very happy with the progress we've been making in retaining our most valuable franchisees and I think it gives us great confidence in getting back to that 95% level," he said. "We're not seeing anything out of the ordinary right now. Foreclosures are still ... about less than half [of] 1% of our system, and we were really pleased to see the terms improve, not just to the prior year, but to 2019 levels."

For full-year 2021, the company also projects net rooms growth of between 1% and 2%.

Wyndham's Chief Financial Officer Michele Allen said "first quarter results were better than we expected with RevPAR in the U.S., leading the way."

She said "if there was a silver lining" to the struggles brought on by the pandemic over the past year, "it was a unique opportunity it provided us to showcase the advantages of the select-service space," a segment that "is resilient and built to perform well in both upsides and downsides."

In most key performance metrics, Wyndham reported significant year-over-year declines, but Ballotti said positioning allowed the company's hotels to continue to capture some demand and drive improvements in the metrics, compared to the third quarter.

Global comparable revenue per available room fell 11% year over year in the first quarter, compared to the first quarter of 2020, and was down 31% compared to the first quarter of 2019.

The company's international portfolio contributed the most to that decline, down 14% year over year and down 45% from the same quarter in 2019. For the U.S. portfolio, RevPAR was down 8% year over year and down 25% from 2019.

The reason for the difference in year-over-year metrics, according to the company's earnings release, is that "global and international RevPAR began to lap the onset of the COVID-19 pandemic in January 2021 while the U.S. began to lap its onset in March 2021."

"As such, comparisons to 2019 (on a two-year basis) are more meaningful when evaluating trends," the company noted.

RevPAR performance has "improved significantly throughout the month of April," Ballotti said on the earnings call, noting that month to date, domestic RevPAR is "down only 7% to 2019," and the company's hotels in the economy segment "running ahead of 2019 levels across all brands."

He added that Wyndham's hotels in the Florida, Arizona and Utah markets are posting 70% occupancies, and 75% of its hotels in the U.S. are in markets where occupancies are at or above 50% month to date.

Cancellation rates have also normalized, and the average booking window for Wyndham hotels have lengthened, he said.

The expanding of booking windows and average length of stay bodes well for continued demand pickup through the spring and summer months.

Wyndham reported first-quarter revenues totaling $303 million, down 26% from $410 million for the same quarter in 2020. The company's franchising business contributed $209 million of total revenue, down 14% from 2019, while its management business revenue was $94 million, down 44% year over year.

The company generated $59 million of free cash flow in the first quarter, compared to $10 million in the first quarter of 2020. As of March 31, Wyndham had $531 million of cash and $1.3 billion in total liquidity.

Adjusted earnings before interest, tax, depreciation and amortization for the quarter was $97 million, compared to $109 million in the first quarter of 2020. Net income for the quarter was $24 million, compared to $22 million in the first quarter of 2020.

The company raised its expectations regarding RevPAR impact on adjusted EBIDTA for full-year 2021 — projecting that each percentage point that RevPAR grows, compared to 2020, will generate approximately $2.8 million of adjusted EBITDA. The previous expectation, provided in February, was a $2.5 million impact per point of RevPAR change.

As of press time, Wyndham Hotels & Resorts’ stock was trading at $75.24, up 26.6% year to date. The S&P 400 MidCap Index was up 22.3% for the same period.