NYSE:WH Wyndham Hotels & Resorts Q2 2023 Earnings Report $85.21 +0.30 (+0.35%) Closing price 04/25/2025 03:59 PM EasternExtended Trading$85.26 +0.05 (+0.05%) As of 04/25/2025 07:59 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Wyndham Hotels & Resorts EPS ResultsActual EPS$0.93Consensus EPS $0.92Beat/MissBeat by +$0.01One Year Ago EPS$1.07Wyndham Hotels & Resorts Revenue ResultsActual Revenue$362.00 millionExpected Revenue$365.81 millionBeat/MissMissed by -$3.81 millionYoY Revenue Growth-6.20%Wyndham Hotels & Resorts Announcement DetailsQuarterQ2 2023Date7/26/2023TimeAfter Market ClosesConference Call DateThursday, July 27, 2023Conference Call Time8:30AM ETUpcoming EarningsWyndham Hotels & Resorts' Q1 2025 earnings is scheduled for Wednesday, April 30, 2025, with a conference call scheduled on Thursday, May 1, 2025 at 8:30 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Wyndham Hotels & Resorts Q2 2023 Earnings Call TranscriptProvided by QuartrJuly 27, 2023 ShareLink copied to clipboard.There are 11 speakers on the call. Operator00:00:00Welcome to the Wyndham Hotels and Resorts Second Quarter 2023 Earnings Conference Call. At this time, all participants I would now like to turn the call over to Matt Capuzzi, have Senior Vice President of Investor Relations. Speaker 100:00:40Thank you, operator. Good morning and thank you for joining us. With me today are Jeff Bellotti, our CEO and Michelle Allen, our CFO. Before we get started, I want to remind you that our remarks today will contain forward looking statements. These statements are subject to risk factors that may cause our actual results to differ materially from those expressed or implied. Speaker 100:01:01These risk factors are discussed in detail in our most recent annual report on Form 10 ks filed with the Securities and Exchange Commission and any have filed with the SEC. We'll also be referring to a number of non GAAP measures. Corresponding GAAP measures and a reconciliation of non GAAP measures to GAAP metrics are provided in our earnings release, which is available on our Investor Relations website are at investor. Winnhamhotels.com. We are providing certain measures discussing future impact on a non GAAP basis only because without unreasonable efforts, we are unable to provide the comparable GAAP metric. Speaker 100:01:41In addition, last evening, we posted an investor presentation are conducting supplemental information on our Investor Relations website. We may continue to provide supplemental information on our website in the future. Are in line with the SEC and any public conference calls are webcast. With that, I will turn the call over to Jeff. Speaker 200:02:06Thanks, Matt, and thanks, everyone, for joining us are ready for our Q2 earnings call. This quarter marked our 5th year as a public company since our spin off from Wyndham Worldwide in 2018. 5 years later, we're a significantly stronger company with a much more simplified business model. We've moved from a franchise and managed hotel company to a pure play franchise business, having sold our owned hotels and exited the U. S. Speaker 200:02:31Hotel management business, along with all of our management guarantees and performance commitments. As the world's largest hotel franchise company whose growth continues to accelerate, Our teams have so much to be proud of. Over the past 5 years, we've launched, acquired and integrated 5 new brands, are bringing our portfolio to 24 brands globally in every segment of the industry from economy to luxury. With the industry's number one loyalty program as named by U. S. Speaker 200:03:03News and World Report just this week, Wyndham Rewards is now driving nearly one out of Speaker 300:03:11are free to check ins Speaker 200:03:11domestically for our franchisees. Our brands are marketed under the By Wyndham umbrella marketing banner that has surged roughly 2,000,000 times each and every day. We've expanded into over 55 new countries, debuting our brands more than 100 times in in countries where they've never been before, while expanding our global development pipeline by over 50% to 228,000 rooms and nearly 1850 hotels. Despite the impact from COVID, we've driven gross unit additions at an average have reached annual growth rate of over 7% over these past 5 years, and we've improved our franchisee retention rate from 93% to over 95% with the industry's leading retention rates in the economy segment. From an earnings standpoint, we've grown our adjusted EBITDA by over 70% and we've improved our franchise margin from 65% to over 80%. Speaker 200:04:08We've proven ourselves as a company dedicated to the and long term success of our franchisees, team members and shareholders, the latter of whom we've returned over $1,600,000,000 of capital to since listing on the NYSE were approximately 27% of our market cap at Spin. After 8 strong quarters of consistent earnings growth coming out of COVID and a very strong Q1 of 2023, Our second quarter was no exception. Globally, RevPAR grew 7% in constant currency. Net rooms increased 4%. Our development pipeline grew by 1% sequentially and by 10% to prior year and adjusted EBITDA increased 8% on a comparable basis. Speaker 200:04:52Have a good day. We generated $74,000,000 in free cash flow and we returned another $139,000,000 of capital to our shareholders. Have a good day. Demand growth and recovery overseas was especially strong. Occupancy improved 16% year over year and RevPAR grew 34%. Speaker 200:05:12China is now at 99% of 2019 RevPAR levels, driven by strong leisure bookings over the May Labor Day and Dragon Boat Festival Holidays. U. S. RevPAR is now normalizing against the record comps we saw last year, Speaker 300:05:29have a strong year over year growth versus pre COVID levels has Speaker 200:05:29remained strong. We saw growth of 9% in April, moderate to 6% in May and then rebound to 10% in June and July month to date stands at 12%, a 200 basis point acceleration from June. Fundamentals remain strong and our select service and brands continue to outpace their full service counterparts across the industry by 300 basis points in the 2nd quarter. Recent economic data continues to build our confidence for future demand and booking trends. June's Consumer Confidence Index increased 7 points, showing positive movements in both the present and future expectation components, while at the at the same time, U. Speaker 200:06:09S. Unemployment remains at its lowest levels since the 1960s. Our middle class guests with average household incomes of over $90,000 nearly 30% above the U. S. Median have seen wage and savings growth of approximately 20% and nearly 30 consistently since 2019. Speaker 200:06:28And with their wage growth outpacing the rate of inflation since the start of 2019, may continue to allocate a higher share of their wallets to travel. July month to date Google search volume for affordable travel is running 8% ahead of last year. Have a good day. When combining the strong leisure travel trends with the double digit increases versus 2019 that we continue to generate from the infrastructure accounts who drive over 20% of our franchisees revenues, we remain bullish about our growth prospects in the quarters and years ahead. We grew our overall system for the 10th consecutive quarter by 1% sequentially and by 4% versus prior year. Speaker 200:07:07Have a good day. With strong conversion and solid new construction activity, we opened nearly 18,000 rooms in the quarter, which was 23% higher than last year are in line with the expectations of the company and 10% higher than 2019. Year to date through June 30, we've opened 198 hotels, are opening more than one hotel each and every day. We improved our franchisee retention rate by another 20 basis points from where it stood at the same time last year, which when combined with the consistency of our strong openings performance, position us solidly on track to achieve our full year net room growth outlook are up 2% to 4%. Here in the United States, we grew our system for the 8th sequential quarter, including another 100 basis have placed a significant amount of significant growth in the more revenue intense mid scale and above segments this quarter. Speaker 200:07:58We added over 6,400 rooms, including in the Hawthorne Suites Houston and Kingwood near George Bush InterContinental Airport and the La Quinta Manchester, Tennessee near the Jack Daniel's distillery, both have new construction openings. Internationally, we opened 66 hotels, 14% more than last year, and we grew net rooms by over 9%. Our Latin America team grew net rooms by 2% sequentially and by 17% versus prior year, are adding some fantastic new leisure and new business destinations, like the new construction trip by Wyndham in the heart of Brazil's capital city, have a great day. Our EMEA region drove over 1% of sequential and over 9% of year over year organic have net room growth with quality second quarter conversions like our first Ramada Resort in Cyprus, our first trademark collection in Turkey at Istanbul Airport in our 1st registry collection resort on the Aegean Sea in Greece. In Southeast Asia and the Pacific Rim, which increased their system by are 7% sequentially and by 12% year over year. Speaker 200:09:08We opened 6 new hotels this quarter, including the Wyndham Grand Fuquaq, a have experienced a 4% sequential and a 13% net room growth in our direct franchising system, We opened 10 new construction hotels, along with 30 conversion hotels, which was 19 more than last year, including the beautiful new Wyndham Garden Shenzhen located in the Central Business District next to Huawei's World Headquarters. We grew our development pipeline 1% sequentially and by 10% versus prior year to a record 200 and 28,000 rooms in nearly 1850 hotels, marking Wyndham's 12th consecutive quarter of sequential pipeline growth. Our teams awarded over 175 contracts for approximately 24,000 room additions, 6% are ahead of last year and 7% higher than 2019. Over 70% of our pipeline is in the higher revenue generating mid scale, are in the upper upscale and luxury chain segments. Finally, on the Echo Suites extended stay front, over the past few weeks, we awarded another 60 new contracts to establish and experienced developers, including what will be the brand's first hotels in Canada. Speaker 200:10:39At our Echo Suites by Wyndham brand has now a global pipeline of 265 hotels and approximately 33,000 rooms. Internationally, our teams executed 21% more rooms in the 2nd quarter than they did in 2019, with similar growth have been both conversion and new construction hotel deals led by our Latin America region and our China direct franchising business. For the 9th consecutive quarter, revenue from our general infrastructure related business accounts increased double digits versus 2019, reflecting both higher ADRs as well as an increase in our capture rate as the earmark spend from the infrastructure and chips act have yet to be deployed into market in a meaningful way. As we prepare for the acceleration of infrastructure spending in the months and years ahead, have expanded our sales teams by 25%. We've enhanced our digital capabilities to drive more leads, and we've invested in new technology to enable have seamless bookings for these infrastructure workers. Speaker 200:11:40As a result, we're seeing a promising leads generated for our hotels are up 15% year over year and the number of new accounts acquired are up nearly 20%. These investments are paving the way for significant revenue growth from this category over the next handful of years. In closing, Q2 was another strong quarter that saw continued improvement in global RevPAR, executions, have opened up the call for questions. Openings, retention and net room growth both domestically and internationally. Of all the accomplishments that our team members have achieved this quarter and throughout each of the last 20 quarters since becoming a public company, there is no greater accomplishment than fostering a more diverse global community, while living our core values of integrity, accountability, inclusivity, caring and fun, we could now say that at mid year, we have been named for in 2023 is one of Newsweek Magazine's Global Most Loved Workplaces, one of Ethisphere's World's Most Ethical Companies, are in one of DiversityInc's top 50 companies for diversity and none of this would be possible without the constant support and engagement of our franchisees and team members, an engagement level which has never been stronger in Wyndham Hotels and Resorts' last 5 years as a public company. Speaker 200:12:56And with that, I'll turn the call over to our CFO, Michelle Allen. Michelle? Speaker 400:13:01Thanks, Jeff, and good morning, everyone. I'll begin my remarks today with a detailed review of our Q2 results. I'll then review our cash flows and balance sheet followed by our outlook. Before we get started, Let me briefly remind you that the year over year comparison of our financial results is impacted by the sale of our owned hotels and the exit of the Select Service Management business as well as the timing of our marketing spend spend. This year, our marketing spend has returned to a more normalized pace. Speaker 400:13:30In contrast, last year's spending pattern was significantly dampened by concerns regarding the potential impact of the Omicron variant on demand. Though we have now lapped the owned hotel sales and select service management business exit, the marketing fund variability will impact the quarterly year over year comparisons for the remainder of 2023. To enhance transparency and provide a better understanding of the results of our ongoing operations, are consistent with last quarter, I will be highlighting our results on a comparable basis, which neutralizes these impacts. Have a Speaker 300:14:06good day. We generated $358,000,000 of fee related and other Speaker 400:14:06revenues compared to $354,000,000 last year, which included $12,000,000 from the select service management business and owned hotels. On a comparable basis, fee related and other revenues increased 5% year over year, which as expected included an adverse first timing impact of 300 basis points relating to revenue recognition in our loyalty program. Royalties and franchise fees grew 7%, while license and ancillary fees grew 10%. Adjusted EBITDA was $158,000,000 in the 2nd quarter compared to $175,000,000 last year, which included a $3,000,000 contribution from the select service management business and owned hotels. Have a good day. Speaker 400:14:45The year over year change was also impacted by $27,000,000 of marketing fund timing. As I mentioned, with marketing spend returning to a more normalized cadence this year, Marketing expenses in the Q2 of 2023 exceeded revenues by $15,000,000 while marketing revenues exceeded expenses by $12,000,000 in the Q2 last year. On a comparable basis, adjusted EBITDA increased 8% year over year, primarily reflecting our revenue growth and our adjusted EBITDA margin improved 40 basis points. 2nd quarter adjusted diluted EPS was $0.93 are up 10% on a comparable basis, reflecting our adjusted EBITDA growth as well as benefits from our share repurchase activity, which were partially offset by higher interest In the Q2, global RevPAR grew 7% on a constant currency basis, driven by continued ADR growth and strong demand recovery overseas, especially in Asia Pacific and EMEA. U. Speaker 400:15:43S. RevPAR was down 1% year over year and up 8% versus will be conducting a have presented a moderation of the robust leisure travel growth we saw last year, which largely favored the select service chain scale. Have a good day. Now as travel habits are normalizing, we're seeing a revival in cruise, center city and international vacations, partially counterbalancing The robust summer demand our hotels experienced last year, particularly in Florida and across the South Atlantic region. Our select service brands continue to be the strongest performing segment in the industry, as Jeff mentioned, outpacing the full service segment by 300 basis points in the 2nd quarter. Speaker 400:16:26Have a listen only mode. Internationally, RevPAR came in stronger than expected, accelerating from a constant currency growth rate of 20% versus 2019 in the first quarter reached to 33% in the 2nd quarter with over 10 full points of occupancy opportunity ahead for demand to return to pre COVID levels. Have a question and answer session. In China RevPAR was at 99% of 2019 levels during the Q2, Southeast Asia and the Pacific Rim was at 97% in EMEA, LatAm and Canada were all meaningfully above 2019 levels. Sequentially, international occupancy improved to 89% of 2019 levels are from 84% in the Q1. Speaker 400:17:02This improvement was driven by an acceleration of demand in China, which improved to 83% of 2019 levels from 76% will be in the Q1. Before I move on to cash flow, let me quickly discuss the current financing environment for our franchisees. Have a good day. Financing for well established borrowers remains generally available, particularly at the community bank level where approximately 70% of our new projects starts are financed. And Despite more than a 50% decline year over year in industry wide buy sell transaction volumes, our teams not only opened 23% more rooms this quarter than they did last year, they also executed 6% more rooms year over year and 7% more than 2019. Speaker 400:17:44Have a good day. Speaker 300:17:46We continue to Speaker 400:17:46monitor the situation and although it has not had a meaningful impact on our business, we have a variety of programs ready to assist owners if necessary. Have a great day. On to free cash flow. We generated $74,000,000 in the 2nd quarter and $158,000,000 year to date with a free cash flow conversion rate from adjusted EBITDA are at 52%. We are solidly on track to achieve our goal of converting 50% to 55% of full year adjusted EBITDA to free cash flow, which at the adjusted net income line item translates to approximately 100%. Speaker 400:18:17We returned $139,000,000 to our shareholders during the in the Q2 of 2023 through $109,000,000 of share repurchases and $30,000,000 of common stock dividends. Given the depressed share price in the 2nd quarter, We opportunistically repurchased twice the amount we bought back in the Q1. Year to date, we have repurchased 2,400,000 shares of our stock for $165,000,000 Speaker 300:18:40have a good day. Speaker 400:18:40We ended the quarter with approximately $800,000,000 in total liquidity and our net leverage ratio of 3.2 times was at the lower end of our target range. Have a good day. In the Q2, we took advantage of a narrow window to refinance our $1,100,000,000 Term Loan B Facility that was set to mature in May 2025. This debt was replaced with a new term loan B facility of the same amount, which will now mature in May 2030 and carries an interest rate of have a Speaker 300:19:08total of $225,000,000 as Speaker 400:19:09a result of this transaction, we moved our next material debt maturity to 2027, increased our weighted average maturity from 3.2 to 6 years and reduced our debt payments to only $125,000,000 over the next 3 years. Our capital allocation strategy is unchanged. We remain disciplined on the core tenets of our M and A strategy and will pursue transactions that are complementary to our are currently experiencing brand portfolio and accretive from an earnings and net room growth perspective. We will also continue to incentivize franchisees will be able to invest in new brand prototype designs to improve our overall brand equity, which in turn helps increase our retention rate. And as usual, have a question and answer session. Speaker 400:20:08First, our outlook for RevPAR, net room growth, revenue and adjusted EBITDA all remain unchanged. We now expect interest expense should be in the range of $100,000,000 to $102,000,000 $6,000,000 higher than our prior outlook and as a result have reduced our adjusted net income outlook will be subject to a range of $336,000,000 to $348,000,000 Adjusted diluted EPS is projected to be $3.92 Speaker 300:20:35have reached the end of the call to Speaker 400:20:364.06 dollars unchanged versus our prior outlook as a result of our Q2 share repurchase activity. This outlook is based on a lower diluted share account of 85,800,000 shares and as usual excludes any future potential share repurchase activity. Our outlook for free cash flow conversion rate also remains unchanged, as do our expectations for the Marketing Fund's contribution of $10,000,000 on a full year basis. However, I do want to provide some color on the projected quarterly impacts. We expect fund revenues will outpace fund expenses will be recorded by approximately $29,000,000 in the back half of the year at approximately $10,000,000 to $15,000,000 per quarter to arrive at our estimated full year underspend Speaker 300:21:18have a record of $10,000,000 which will Speaker 400:21:19complete our recovery of the $49,000,000 investment that we made back in 2020. In closing, our business continues to operate above 2019 levels with additional room for improvement given occupancy levels here in the U. S. And internationally. We produced another quarter of solid adjusted EBITDA and free cash flow, significantly increased capital returns and strengthened our balance sheet and financial have flexibility through the refinancing of our Term Loan B facility. Speaker 400:21:46As we enter the second half of the year, we are confident that our resilient and simplified business model positions us well to deliver on shareholder commitments in any environment. With that, Jeff and I would be happy to take your questions. Operator? Operator00:22:01Have the floor is now open for questions. Have at any point your question has been answered. You may remove yourself from the queue by pressing star 2. Again, we do ask that you limit yourself have to one question and one follow-up. Thank you. Operator00:22:23Our first question comes from Patrick Scholes with Truist Securities. Please go ahead. Speaker 500:22:29Hi. Good morning, Jeff and Michelle. Good morning. Speaker 300:22:37A couple Speaker 500:22:40of questions here. First one, Over the years made strong progress where the retention rate stands at about 95% right now. Speaker 200:22:51To improve that or would Speaker 500:22:52you think of that as a steady state equilibrium? Speaker 200:22:57No. We certainly see opportunity have to improve that rate, Patrick. As you point out, it has moved both domestically and internationally in the right direction and globally, we've moved it from 93% to 94% to over 95%. And just over the last 12 months, we've seen 20 basis points of retention improvement. Our longer term stated goal is to move that to 96%. Speaker 500:23:26Okay, great. And then just two other quick questions here. Michelle, you had mentioned about have programs to assist potential franchisees. Without giving away the secret sauce, if I were a franchisee needing such assistance, what would at a high level some of those programs be? Speaker 400:23:48Yes. Well, Patrick, as you know, our business is highly cash generative and we're always looking for ways are happy to reinvest that cash back into the business. So we're happy to put more money to work when the ROI makes sense for both us and the owner. And typically that has come in the form of Dan's, but we could easily adapt that in the current economic environment, we have a newly implemented program with a reputable lender to source construction financing, for example. We won't disclose have too many details, obviously, as you mentioned for competitive reasons as you can understand, but the program provides a more programmatic approach to financing with Wyndham and obviously provides our franchisees very competitive terms. Speaker 500:24:39Okay, fair enough. And then just last quick question. Jeff, you certainly have talked about a positive tailwind from Federal infrastructure spending. Is there any way to quantify for your business what That how much that may have helped you so far or possibly helped you for the rest of the year? Maybe not quantifiable, but Just curious if you have something. Speaker 200:25:10It absolutely, we believe helped us in the quarter, Patrick. Our Economy saw 200 basis points of weekday RevPAR index outperformance, and it was a mix of both rate and occupancy. We're in, as we've talked about before, the really early innings of what will play out over the next 8 years. And As we've said in our script, we've seen an uptick in inquiries and leads and bookings. But again, it's really early days. Speaker 200:25:38The advance appropriation, I think, for the first $68,000,000,000 becomes available to fund starting later this year. So as we've said, we sized this over the next 5 to 8 years is a $3,000,000,000 revenue opportunity for our franchisees and our owners, and we begin to see it play out as early as this quarter in terms of that mid week RPI outperformance. Speaker 500:26:04Okay. Thank you. So certainly, it sounds like a multiyear tailwind for you folks. Speaker 600:26:10Absolutely. Thank you. Speaker 200:26:11Thanks, Patrick. Operator00:26:14Have a question. Thank you. Our next question comes from Joe Speaker 300:26:19Greff with Speaker 700:26:19JPMorgan. Good morning, everybody. My first question is a 2 parter on development. Nice to see Echo with a chunky hotel signing This month, we look at that as a distinct positive and obviously it speaks to developer demand amid increasing limited service brand competition. What is the value proposition of Echo today versus these competing brands? Speaker 700:26:46And are you marketing positioning, are supporting it differently than say at the initial launch. And then my second part, Jeff Michel, is can you talk about China new developments and new hotel signing activity is it back fully, is it still on recovery mode from a development perspective, not from a RevPAR perspective and not back fully, and how much of second half gross room addition are coming out of China. Speaker 200:27:11Okay. I'll start with Echo and the question on are competitive extended stay launches and are we marketing it any differently, Joe, or not. And we're not seeing any impact. These competitive launches are not are in the range of 20% larger with owe additional Elevator Banks, more larger public spaces, higher amenity requirements and operating costs. Our Echo developers continue to believe that Echo will drive a higher ROI due to much lower cost are key and that's the way we're marketing it. Speaker 200:27:49Lower ongoing operating costs, higher gross operating profits and they believe, we believe that at the 1,800,000 companies out there contracting for accommodations for their infrastructure workers are going to be seeking economy average daily rates with average length of stays approaching over 30 nights versus that mid scale and above average daily rate. It is a very large and underpenetrated segment, as you know, with 15 times fewer hotels in the extended stay Speaker 300:28:19space than transient hotels, and Speaker 200:28:19we think there's plenty of space for continued tell us and we think there's plenty of space for continued room growth there. 2nd part on China in China Development, we were really pleased with the openings, the executions on the development front, we opened another 3,000 direct China rooms this quarter and those came in at 3 times as you know the license fees of our master license agreement. That drove a 4% sequential and a 13% China direct net room growth. We opened 10 new construction hotels have a record of 30 conversion properties. And the 65 new China deals that we signed in the 2nd quarter was 50% more have been a record 41 deals signed back in the Q4 of last year and 40 were direct franchise contracts split pretty evenly between new construction and conversion. Speaker 200:29:12So we're really pleased with what our teams are seeing there in terms of the pick of development opportunities in China. Did I miss anything, Michelle, On Joe's second half. Speaker 400:29:23Again, no, Jeff. I would just say that direct franchising stat you quoted the 40 new deals in the quarter is 90% growth year over year. Speaker 700:29:34Yes, that's you've officially answered it, Jeff. And then My second question and this one might be a little bit more difficult to answer. Someone is going to ask it, so might as well be me. Just over a couple of months ago, the Wall Street Journal reported at that had an interest in you guys. Jeff, have they spoken to you and the Board about a combination? Speaker 700:29:53Has this potentially generated any other interest from other entities, they reached out to you and the Board. We saw buyback activity accelerate in the quarter and some insider selling and maybe that gives us have outside or some indication of how legit this reporting might be, but then we also had this unusual semi pre announcement from Choice this month. Have questions. Speaker 200:30:17Yes. Thanks, Joe. We never comment on speculative news articles. And look, are focused on our business as usual and growing our business. And that's all about what we've been talking about in the script, driving value for our guests, our franchisees and our stakeholders. Speaker 700:30:32Thank you. Speaker 200:30:33Thanks, Joe. Operator00:30:36Thank you. Our next question comes from David Katz with Jefferies. Speaker 800:30:41Hi, good morning everyone. Speaker 500:30:42Good morning, David. Good morning. Speaker 800:30:45So I wanted to just have double back on the pipeline, because it's a point of focus for all of us. And just making sure that deals notwithstanding the one larger one that you announced that deals are entering the pipeline at the same rate that they're passing through the pipeline at the same rate that they're getting financing, etcetera. So any color you can give us on how that backfill is starting progressing for the future would be helpful. Speaker 200:31:21Sure. Thanks, David. They're entering and exiting the pipeline as they always have. As we've talked before, 2 thirds of our openings come out of the pipeline each and every year, we're not seeing any issues there or any changes there. So a larger pipeline, of course, gives us confidence into the future on accelerating our net room growth, as does the improvement as we were just talking about that we continue to make with retention, 80% of the pipeline is now new construction. Speaker 200:31:48And from signing to opening, It usually exits after it enters on average 4 years and the other third, the conversion rooms are averaging less than a year to come out of the pipeline, but this was the 12th consecutive quarter of sequential growth. We were up 10% to last year have a record 230,000 rooms. International signings were up very strongly, up 70% and 5% higher than 2019, and not including in the multi unit contract echo deals that you referenced, we still increased the pipeline 8% globally. 70% of that pipeline is in the midscale and above, 80% of the pipeline is midscale and above if you take out the new EPCO product, And we're not seeing any changes or any slowdown. The new construction pipeline increased to prior year and no slowdown in new construction project starts or any drop off in the percentage of the pipeline rooms now under construction. Speaker 200:32:47Actually, We have more rooms now under construction as the pipeline continues to grow sequentially. So good growth in conversion pipeline have a very strong quarter and just really consistent growth across our international regions with the highest growth coming out, if you look back to pre COVID levels, Europe, Middle East has grown its pipeline by 60% and continues to strengthen and Latin America has grown 70% since before 2019, especially in Mexico and the Doctor. Speaker 800:33:20Have a question. Understood. Thank you. And so for my follow-up, we've all seen the RevPAR numbers in limited service. The lower end chain scales have have shown some RevPAR weakness relative to the total. Speaker 800:33:33I just wonder where you fit into that. And are You feel like you're performing in line, you're able to outperform and if you are, how are you doing it as much as you can tell us? Speaker 400:33:47Yes. I would say, I don't think the lower end chain sales are showing weakness. I know the year over year comps might be a little bit more difficult because they had are covered much faster than their counterparts. If you look actually, if you look at it versus 2019 neutralizing for all that recovery noise, I think they're still the best performing segment in the industry. And I would say in the U. Speaker 400:34:12S. Specifically, we saw growth versus 2019 in the Q2 consistent with what we saw in the Q1. And then Jeff have mentioned in his prepared remarks that we're seeing July accelerate from those 2nd quarter growth rate. So we feel really confident about travel demand throughout the summer season. All of the leading indicators we look at remain Speaker 800:34:52that there is some change in how that industry data is being calculated reported that may be part of what we're seeing? Speaker 400:35:01No, not at all. Speaker 800:35:03Okay. Okay. All right. Thank you very much. Speaker 400:35:06Thank you. Speaker 200:35:08Thanks, David. Operator00:35:10Have a question. Thank you. Our next question comes from Speaker 300:35:14Brandt Montour with Speaker 200:35:15Barclays. Hey, everybody. Speaker 900:35:17Thanks for taking my questions. So great to hear those May, June, July stats for the U. S. I'm curious when you, Michelle, call out the The acceleration in July, just if you could maybe unpack that a little bit. Is it more weekends versus weekdays? Speaker 900:35:36Is there particular strength more on the economy versus midscale and above and any extra color there? Speaker 400:35:45I think we're seeing strength across the board, certainly more weekday strength continuing in from the Q2, but weekends remain very strong. We're seeing pickup in occupancy as well, and then continued ADR, increases Speaker 300:36:03are in line Speaker 400:36:03with what we had seen in the Q2. Speaker 900:36:06Okay. That's helpful. And then, I want to talk about I want to unpack the financing have a comment commentary as well as Slide number 9, which is new. You guys called out not seeing a meaningful impact in terms of availability of capital call for new construction financing. Your larger peers have publicly called out a change there, a lack of availability of capital. Speaker 900:36:32Your slide looks like you did some extra work here over the last 3 months in terms of the mix of community banks and same community banks is are more cycle agnostic with which their lending practices. I guess if you could just put a finer point on that for us. Is the smaller footprint, is the lower chain scale? I guess, do you feel like your brands and your business is essentially a competitive advantage right now versus your broader industry set in terms of acquiring capital for construction. Speaker 400:37:01Yes, I think that's an interesting perspective for Sure. I think what really drives the difference between us and some of the peers is the smaller loan size. Those have always been more can to smaller community banks. And in those banks, it's all about relationships. Our franchisees know their bank presidents by name. Speaker 400:37:21These banks have a deep understanding of the local economies and Of the specific businesses within their communities, you see at community banks, you see loan decisions typically made locally And they're typically made based on a holistic view of the borrower situation, not just one specific will be in the next slide. And not just based on standardized criteria, which is more prevalent in larger banks that are servicing larger loan size. I'll give you a quick example. A few weeks ago, one of our Echo developers secured a loan from a community bank, I think, out in Kansas, a bank that has lent to him multiple times in the past for different business ventures within and outside of the hotel space. And he was able to get 5 year paper at a have 75% loan to cost and a fixed rate of 6.75%. Speaker 400:38:13So if you're just reading the headlines, you wouldn't think that that type of financing exists, but it's very much available at the community bank level. Speaker 600:38:22Excellent. Thank you. Speaker 300:38:26Have a question. Operator00:38:26Thank you. We'll take our next question from Michael Bellisario with Baird. Speaker 600:38:32Thanks. Good morning, everyone. Have just one more on the slide deck, a new slide. You didn't talk about it, but I think it's important that you added back the longer term growth algorithm, have the 8% to 14% range. That's unchanged. Speaker 600:38:46So maybe a couple Speaker 900:38:48of part question here. Speaker 600:38:49How do you think about the drivers today? Why is the range maybe not higher today than it was versus what you last gave in 2019 given all the changes you've made to the business model. And then lastly, the 3% to 5 Cash flow deployment, that's a big input there. Maybe how do you handicap and think about the levers within this bucket? Thanks. Speaker 300:39:11Have a question. Speaker 400:39:11So we've done a lot to simplify the business and we did put the slide back in because we wanted to make sure that everyone understood we're still looking at High single digit, low double digit growth on the EPS line even though we sold our management we exited our management business and sold are owned hotels. So it's a more simple story, same EPS potential. And then we also wanted to show our longer term growth prospects for net room growth at the accelerated 3% to 5% versus the old 2% to 4% pre COVID, Pre simplification. When you think about the 3% to 5% capital deployment, risk there, I think are really low. This business is highly cash are very much generative. Speaker 400:39:56Even in the darkest days of 2020, we were still free cash flow positive and we were free cash flow positive without having to do any forward point sales or anything That was taking from our future cash flow generation capability. So we feel very confident in our ability to generate cash and redeploy that capital to generate sizable EPS growth. Speaker 600:40:20Have Got it. And then just one follow-up on buybacks. Leverage went from 3 to 3.2 if the stock plus or minus remains in the same range. How comfortable are you and where would you lever up to continue buying back stock if it's still at a I think you used significant non warranted discounted level? Speaker 400:40:38We did. I think year to date we've repurchased $165,000,000 And the 2nd quarter repurchases were 2 times the amount we repurchased in the Q1 and that was because we were are leaning in as the stock was trading at a significant unwarranted discount. And If we continue to see it trade at a significant unwarranted discount like it did in the Q2, I think it's fair to expect us have to lean in on share repurchases and we certainly have a tremendous amount of flexibility in the leverage ratio, where we ended the quarter, I think implies over $300,000,000 of additional capacity Before we even move into the upper half of the stated target range. So not going to make any hard commitments today, but you can be assured that we are willing to lean in further if we continue to see a significant unwarranted discount. And you'll note in our earnings release that our Board just approved another $400,000,000 in authorization. Speaker 600:41:46Thanks for the color. Speaker 400:41:49Thank you. Operator00:41:57Our next question comes from Steve Paisella with Deutsche Bank. Speaker 1000:42:03Hey, good morning, everyone, and thanks for taking my questions. The international royalty rate was up nicely year over year, I believe growing 30 basis points. And even the U. S, I think, was up 10 basis points Can you talk about some of the drivers there and how we should think about the royalty rate moving forward? Speaker 400:42:24Have a question. Yes, sure. Jeff, I'll start. Our strategy continues to focus on growing the royalty rate within each region to ensure that we're always building on the and regional equity in the U. S. Speaker 400:42:38Growth on the new construction prototype brands, La Quinta, Microtel and eventually will help us move our domestic rate forward. Of course, remembering a system the size of ours will always move a little bit more gradually given how large it is. Internationally, we see a large opportunity from a royalty rate perspective. We expect the new deals that come into the system will come in at have higher royalty rates than the legacy system in that specific region as we continue to build out our footprint in each market. And as you mentioned, we have seen improvement in our international royalty rate year to date and that is a trend we would expect to continue to see. Speaker 200:43:22And there are so many places for us to grow as Steve oversees. As our brands become more aware in countries and markets like Turkey, for example, where our Ramada was first introduced at a lower royalty rate for sale than it is today, now have 60, 70 hotels in the country. There's tremendous opportunity overseas. We have the most experienced franchise sales team internationally. International continues to be a significant opportunity for us. Speaker 200:43:51There's, as we know, roughly 17,000,000 rooms globally and over 50% of those are unbranded. We have a great value proposition and we're continuing to add countries were no longer, as we've said before, looking to do master license agreement deals internationally, which were these direct franchise deals are always coming in at 3x the royalty rate than the masters were years ago. Speaker 1000:44:29Okay. Thank you. That's helpful. And then you talked about launching and acquiring new brands in your opening remarks. With the success of Echo, can Can you talk about how you view that balance moving forward from maybe acquiring versus launching and any white space you still see in the brand lineup? Speaker 200:44:49Sure. Yes. All of the recent launches we've been really pleased with. We had white space in the all inclusive market and with Playa, have great partner launched Altra by Wyndham and now have a few 1,000 rooms in our pipeline there. Registry collection was a white space for us and without having to go out and acquire a brand, we launched the registry collection. Speaker 200:45:13We now have 17 hotels open and roughly 3,000 rooms in the pipeline and EchoSuite. So we'll continue to look for opportunities like that, but we'll also where opportunities present themselves where we have have markets that have a tuck in opportunity for us as we saw with Vienna House to acquire. And it's a brand that we've got some have really good traction on and are really, really pleased with and is adding some great opportunities for growth for us through in Western and Central Europe along with the Middle East, we don't need to acquire, but when a deal comes along, it's immediately accretive to where we're trading at today will absolutely look at it. Speaker 1000:46:05Okay, great. Thank you. Speaker 200:46:08Have a question. Operator00:46:10Thank you. At this time, we have no further questions in queue. I will now turn the floor back to Jeff Bellotti for any additional or closing remarks. Speaker 200:46:19Well, thanks everybody for your questions and your interest in Wyndham Hotels and Resorts. We were, as Michelle said very pleased with our Q2, where we delivered adjusted EBITDA growth that outperformed expectations. Our teams couldn't be more enthusiastic think about the opportunities that lie ahead, and we're very confident in our ability to deliver outstanding value to our shareholders, our guests and our franchisees. Michelle, Matt and I Speaker 1000:46:43look forward to talking to Speaker 500:46:44you and seeing many of Speaker 200:46:44you in the weeks and the months ahead at many of the upcoming investor conferences that we'll be attending. But before we go, we'd like to remind everybody please tune into the 84th Annual Wyndham Championship from August 3rd through August 6th next week, which will be airing on CBS and the Golf Channel with live coverage beginning on Thursday of next week. Thanks again everybody and have a great day. Speaker 300:47:08Have a question. Operator00:47:08Thank you. This does conclude today's Wyndham Hotels and Resorts Second Quarter 2023 Earnings Conference Call. Please disconnect your line at this time and have a wonderful day. Speaker 800:47:21Thanks, Todd.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallWyndham Hotels & Resorts Q2 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) Wyndham Hotels & Resorts Earnings HeadlinesWyndham Hotels & Resorts (NYSE:WH) Given New $94.00 Price Target at Morgan StanleyApril 25 at 3:11 AM | americanbankingnews.comWyndham Hotels & Resorts (NYSE:WH) Price Target Lowered to $100.00 at BarclaysApril 23 at 3:55 AM | americanbankingnews.comTrump Orders 'National Digital Asset Stockpile'‘Digital Asset Reserve’ for THIS Coin??? Get all the details before this story gains even more tractionApril 26, 2025 | Crypto 101 Media (Ad)Is Wyndham Hotels & Resorts, Inc. (WH) The Best WallStreetBets Stock To Buy According to Hedge Funds?April 21, 2025 | msn.comIs Wyndham Hotels & Resorts Inc. (NYSE:WH) a Reddit Stock with High Potential?April 17, 2025 | msn.comWyndham Hotels & Resorts (WH) Gets a Buy from Goldman SachsApril 15, 2025 | markets.businessinsider.comSee More Wyndham Hotels & Resorts Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Wyndham Hotels & Resorts? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Wyndham Hotels & Resorts and other key companies, straight to your email. Email Address About Wyndham Hotels & ResortsWyndham Hotels & Resorts (NYSE:WH) engages in the franchise and operation of hotels under the Wyndham brand. It operates through the Hotel Franchising and Hotel Management segments. The Hotel Franchising segment focuses on licensing the company’s lodging brands and providing related services to third-party hotel owners and others. The Hotel Management segment provides management services. 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There are 11 speakers on the call. Operator00:00:00Welcome to the Wyndham Hotels and Resorts Second Quarter 2023 Earnings Conference Call. At this time, all participants I would now like to turn the call over to Matt Capuzzi, have Senior Vice President of Investor Relations. Speaker 100:00:40Thank you, operator. Good morning and thank you for joining us. With me today are Jeff Bellotti, our CEO and Michelle Allen, our CFO. Before we get started, I want to remind you that our remarks today will contain forward looking statements. These statements are subject to risk factors that may cause our actual results to differ materially from those expressed or implied. Speaker 100:01:01These risk factors are discussed in detail in our most recent annual report on Form 10 ks filed with the Securities and Exchange Commission and any have filed with the SEC. We'll also be referring to a number of non GAAP measures. Corresponding GAAP measures and a reconciliation of non GAAP measures to GAAP metrics are provided in our earnings release, which is available on our Investor Relations website are at investor. Winnhamhotels.com. We are providing certain measures discussing future impact on a non GAAP basis only because without unreasonable efforts, we are unable to provide the comparable GAAP metric. Speaker 100:01:41In addition, last evening, we posted an investor presentation are conducting supplemental information on our Investor Relations website. We may continue to provide supplemental information on our website in the future. Are in line with the SEC and any public conference calls are webcast. With that, I will turn the call over to Jeff. Speaker 200:02:06Thanks, Matt, and thanks, everyone, for joining us are ready for our Q2 earnings call. This quarter marked our 5th year as a public company since our spin off from Wyndham Worldwide in 2018. 5 years later, we're a significantly stronger company with a much more simplified business model. We've moved from a franchise and managed hotel company to a pure play franchise business, having sold our owned hotels and exited the U. S. Speaker 200:02:31Hotel management business, along with all of our management guarantees and performance commitments. As the world's largest hotel franchise company whose growth continues to accelerate, Our teams have so much to be proud of. Over the past 5 years, we've launched, acquired and integrated 5 new brands, are bringing our portfolio to 24 brands globally in every segment of the industry from economy to luxury. With the industry's number one loyalty program as named by U. S. Speaker 200:03:03News and World Report just this week, Wyndham Rewards is now driving nearly one out of Speaker 300:03:11are free to check ins Speaker 200:03:11domestically for our franchisees. Our brands are marketed under the By Wyndham umbrella marketing banner that has surged roughly 2,000,000 times each and every day. We've expanded into over 55 new countries, debuting our brands more than 100 times in in countries where they've never been before, while expanding our global development pipeline by over 50% to 228,000 rooms and nearly 1850 hotels. Despite the impact from COVID, we've driven gross unit additions at an average have reached annual growth rate of over 7% over these past 5 years, and we've improved our franchisee retention rate from 93% to over 95% with the industry's leading retention rates in the economy segment. From an earnings standpoint, we've grown our adjusted EBITDA by over 70% and we've improved our franchise margin from 65% to over 80%. Speaker 200:04:08We've proven ourselves as a company dedicated to the and long term success of our franchisees, team members and shareholders, the latter of whom we've returned over $1,600,000,000 of capital to since listing on the NYSE were approximately 27% of our market cap at Spin. After 8 strong quarters of consistent earnings growth coming out of COVID and a very strong Q1 of 2023, Our second quarter was no exception. Globally, RevPAR grew 7% in constant currency. Net rooms increased 4%. Our development pipeline grew by 1% sequentially and by 10% to prior year and adjusted EBITDA increased 8% on a comparable basis. Speaker 200:04:52Have a good day. We generated $74,000,000 in free cash flow and we returned another $139,000,000 of capital to our shareholders. Have a good day. Demand growth and recovery overseas was especially strong. Occupancy improved 16% year over year and RevPAR grew 34%. Speaker 200:05:12China is now at 99% of 2019 RevPAR levels, driven by strong leisure bookings over the May Labor Day and Dragon Boat Festival Holidays. U. S. RevPAR is now normalizing against the record comps we saw last year, Speaker 300:05:29have a strong year over year growth versus pre COVID levels has Speaker 200:05:29remained strong. We saw growth of 9% in April, moderate to 6% in May and then rebound to 10% in June and July month to date stands at 12%, a 200 basis point acceleration from June. Fundamentals remain strong and our select service and brands continue to outpace their full service counterparts across the industry by 300 basis points in the 2nd quarter. Recent economic data continues to build our confidence for future demand and booking trends. June's Consumer Confidence Index increased 7 points, showing positive movements in both the present and future expectation components, while at the at the same time, U. Speaker 200:06:09S. Unemployment remains at its lowest levels since the 1960s. Our middle class guests with average household incomes of over $90,000 nearly 30% above the U. S. Median have seen wage and savings growth of approximately 20% and nearly 30 consistently since 2019. Speaker 200:06:28And with their wage growth outpacing the rate of inflation since the start of 2019, may continue to allocate a higher share of their wallets to travel. July month to date Google search volume for affordable travel is running 8% ahead of last year. Have a good day. When combining the strong leisure travel trends with the double digit increases versus 2019 that we continue to generate from the infrastructure accounts who drive over 20% of our franchisees revenues, we remain bullish about our growth prospects in the quarters and years ahead. We grew our overall system for the 10th consecutive quarter by 1% sequentially and by 4% versus prior year. Speaker 200:07:07Have a good day. With strong conversion and solid new construction activity, we opened nearly 18,000 rooms in the quarter, which was 23% higher than last year are in line with the expectations of the company and 10% higher than 2019. Year to date through June 30, we've opened 198 hotels, are opening more than one hotel each and every day. We improved our franchisee retention rate by another 20 basis points from where it stood at the same time last year, which when combined with the consistency of our strong openings performance, position us solidly on track to achieve our full year net room growth outlook are up 2% to 4%. Here in the United States, we grew our system for the 8th sequential quarter, including another 100 basis have placed a significant amount of significant growth in the more revenue intense mid scale and above segments this quarter. Speaker 200:07:58We added over 6,400 rooms, including in the Hawthorne Suites Houston and Kingwood near George Bush InterContinental Airport and the La Quinta Manchester, Tennessee near the Jack Daniel's distillery, both have new construction openings. Internationally, we opened 66 hotels, 14% more than last year, and we grew net rooms by over 9%. Our Latin America team grew net rooms by 2% sequentially and by 17% versus prior year, are adding some fantastic new leisure and new business destinations, like the new construction trip by Wyndham in the heart of Brazil's capital city, have a great day. Our EMEA region drove over 1% of sequential and over 9% of year over year organic have net room growth with quality second quarter conversions like our first Ramada Resort in Cyprus, our first trademark collection in Turkey at Istanbul Airport in our 1st registry collection resort on the Aegean Sea in Greece. In Southeast Asia and the Pacific Rim, which increased their system by are 7% sequentially and by 12% year over year. Speaker 200:09:08We opened 6 new hotels this quarter, including the Wyndham Grand Fuquaq, a have experienced a 4% sequential and a 13% net room growth in our direct franchising system, We opened 10 new construction hotels, along with 30 conversion hotels, which was 19 more than last year, including the beautiful new Wyndham Garden Shenzhen located in the Central Business District next to Huawei's World Headquarters. We grew our development pipeline 1% sequentially and by 10% versus prior year to a record 200 and 28,000 rooms in nearly 1850 hotels, marking Wyndham's 12th consecutive quarter of sequential pipeline growth. Our teams awarded over 175 contracts for approximately 24,000 room additions, 6% are ahead of last year and 7% higher than 2019. Over 70% of our pipeline is in the higher revenue generating mid scale, are in the upper upscale and luxury chain segments. Finally, on the Echo Suites extended stay front, over the past few weeks, we awarded another 60 new contracts to establish and experienced developers, including what will be the brand's first hotels in Canada. Speaker 200:10:39At our Echo Suites by Wyndham brand has now a global pipeline of 265 hotels and approximately 33,000 rooms. Internationally, our teams executed 21% more rooms in the 2nd quarter than they did in 2019, with similar growth have been both conversion and new construction hotel deals led by our Latin America region and our China direct franchising business. For the 9th consecutive quarter, revenue from our general infrastructure related business accounts increased double digits versus 2019, reflecting both higher ADRs as well as an increase in our capture rate as the earmark spend from the infrastructure and chips act have yet to be deployed into market in a meaningful way. As we prepare for the acceleration of infrastructure spending in the months and years ahead, have expanded our sales teams by 25%. We've enhanced our digital capabilities to drive more leads, and we've invested in new technology to enable have seamless bookings for these infrastructure workers. Speaker 200:11:40As a result, we're seeing a promising leads generated for our hotels are up 15% year over year and the number of new accounts acquired are up nearly 20%. These investments are paving the way for significant revenue growth from this category over the next handful of years. In closing, Q2 was another strong quarter that saw continued improvement in global RevPAR, executions, have opened up the call for questions. Openings, retention and net room growth both domestically and internationally. Of all the accomplishments that our team members have achieved this quarter and throughout each of the last 20 quarters since becoming a public company, there is no greater accomplishment than fostering a more diverse global community, while living our core values of integrity, accountability, inclusivity, caring and fun, we could now say that at mid year, we have been named for in 2023 is one of Newsweek Magazine's Global Most Loved Workplaces, one of Ethisphere's World's Most Ethical Companies, are in one of DiversityInc's top 50 companies for diversity and none of this would be possible without the constant support and engagement of our franchisees and team members, an engagement level which has never been stronger in Wyndham Hotels and Resorts' last 5 years as a public company. Speaker 200:12:56And with that, I'll turn the call over to our CFO, Michelle Allen. Michelle? Speaker 400:13:01Thanks, Jeff, and good morning, everyone. I'll begin my remarks today with a detailed review of our Q2 results. I'll then review our cash flows and balance sheet followed by our outlook. Before we get started, Let me briefly remind you that the year over year comparison of our financial results is impacted by the sale of our owned hotels and the exit of the Select Service Management business as well as the timing of our marketing spend spend. This year, our marketing spend has returned to a more normalized pace. Speaker 400:13:30In contrast, last year's spending pattern was significantly dampened by concerns regarding the potential impact of the Omicron variant on demand. Though we have now lapped the owned hotel sales and select service management business exit, the marketing fund variability will impact the quarterly year over year comparisons for the remainder of 2023. To enhance transparency and provide a better understanding of the results of our ongoing operations, are consistent with last quarter, I will be highlighting our results on a comparable basis, which neutralizes these impacts. Have a Speaker 300:14:06good day. We generated $358,000,000 of fee related and other Speaker 400:14:06revenues compared to $354,000,000 last year, which included $12,000,000 from the select service management business and owned hotels. On a comparable basis, fee related and other revenues increased 5% year over year, which as expected included an adverse first timing impact of 300 basis points relating to revenue recognition in our loyalty program. Royalties and franchise fees grew 7%, while license and ancillary fees grew 10%. Adjusted EBITDA was $158,000,000 in the 2nd quarter compared to $175,000,000 last year, which included a $3,000,000 contribution from the select service management business and owned hotels. Have a good day. Speaker 400:14:45The year over year change was also impacted by $27,000,000 of marketing fund timing. As I mentioned, with marketing spend returning to a more normalized cadence this year, Marketing expenses in the Q2 of 2023 exceeded revenues by $15,000,000 while marketing revenues exceeded expenses by $12,000,000 in the Q2 last year. On a comparable basis, adjusted EBITDA increased 8% year over year, primarily reflecting our revenue growth and our adjusted EBITDA margin improved 40 basis points. 2nd quarter adjusted diluted EPS was $0.93 are up 10% on a comparable basis, reflecting our adjusted EBITDA growth as well as benefits from our share repurchase activity, which were partially offset by higher interest In the Q2, global RevPAR grew 7% on a constant currency basis, driven by continued ADR growth and strong demand recovery overseas, especially in Asia Pacific and EMEA. U. Speaker 400:15:43S. RevPAR was down 1% year over year and up 8% versus will be conducting a have presented a moderation of the robust leisure travel growth we saw last year, which largely favored the select service chain scale. Have a good day. Now as travel habits are normalizing, we're seeing a revival in cruise, center city and international vacations, partially counterbalancing The robust summer demand our hotels experienced last year, particularly in Florida and across the South Atlantic region. Our select service brands continue to be the strongest performing segment in the industry, as Jeff mentioned, outpacing the full service segment by 300 basis points in the 2nd quarter. Speaker 400:16:26Have a listen only mode. Internationally, RevPAR came in stronger than expected, accelerating from a constant currency growth rate of 20% versus 2019 in the first quarter reached to 33% in the 2nd quarter with over 10 full points of occupancy opportunity ahead for demand to return to pre COVID levels. Have a question and answer session. In China RevPAR was at 99% of 2019 levels during the Q2, Southeast Asia and the Pacific Rim was at 97% in EMEA, LatAm and Canada were all meaningfully above 2019 levels. Sequentially, international occupancy improved to 89% of 2019 levels are from 84% in the Q1. Speaker 400:17:02This improvement was driven by an acceleration of demand in China, which improved to 83% of 2019 levels from 76% will be in the Q1. Before I move on to cash flow, let me quickly discuss the current financing environment for our franchisees. Have a good day. Financing for well established borrowers remains generally available, particularly at the community bank level where approximately 70% of our new projects starts are financed. And Despite more than a 50% decline year over year in industry wide buy sell transaction volumes, our teams not only opened 23% more rooms this quarter than they did last year, they also executed 6% more rooms year over year and 7% more than 2019. Speaker 400:17:44Have a good day. Speaker 300:17:46We continue to Speaker 400:17:46monitor the situation and although it has not had a meaningful impact on our business, we have a variety of programs ready to assist owners if necessary. Have a great day. On to free cash flow. We generated $74,000,000 in the 2nd quarter and $158,000,000 year to date with a free cash flow conversion rate from adjusted EBITDA are at 52%. We are solidly on track to achieve our goal of converting 50% to 55% of full year adjusted EBITDA to free cash flow, which at the adjusted net income line item translates to approximately 100%. Speaker 400:18:17We returned $139,000,000 to our shareholders during the in the Q2 of 2023 through $109,000,000 of share repurchases and $30,000,000 of common stock dividends. Given the depressed share price in the 2nd quarter, We opportunistically repurchased twice the amount we bought back in the Q1. Year to date, we have repurchased 2,400,000 shares of our stock for $165,000,000 Speaker 300:18:40have a good day. Speaker 400:18:40We ended the quarter with approximately $800,000,000 in total liquidity and our net leverage ratio of 3.2 times was at the lower end of our target range. Have a good day. In the Q2, we took advantage of a narrow window to refinance our $1,100,000,000 Term Loan B Facility that was set to mature in May 2025. This debt was replaced with a new term loan B facility of the same amount, which will now mature in May 2030 and carries an interest rate of have a Speaker 300:19:08total of $225,000,000 as Speaker 400:19:09a result of this transaction, we moved our next material debt maturity to 2027, increased our weighted average maturity from 3.2 to 6 years and reduced our debt payments to only $125,000,000 over the next 3 years. Our capital allocation strategy is unchanged. We remain disciplined on the core tenets of our M and A strategy and will pursue transactions that are complementary to our are currently experiencing brand portfolio and accretive from an earnings and net room growth perspective. We will also continue to incentivize franchisees will be able to invest in new brand prototype designs to improve our overall brand equity, which in turn helps increase our retention rate. And as usual, have a question and answer session. Speaker 400:20:08First, our outlook for RevPAR, net room growth, revenue and adjusted EBITDA all remain unchanged. We now expect interest expense should be in the range of $100,000,000 to $102,000,000 $6,000,000 higher than our prior outlook and as a result have reduced our adjusted net income outlook will be subject to a range of $336,000,000 to $348,000,000 Adjusted diluted EPS is projected to be $3.92 Speaker 300:20:35have reached the end of the call to Speaker 400:20:364.06 dollars unchanged versus our prior outlook as a result of our Q2 share repurchase activity. This outlook is based on a lower diluted share account of 85,800,000 shares and as usual excludes any future potential share repurchase activity. Our outlook for free cash flow conversion rate also remains unchanged, as do our expectations for the Marketing Fund's contribution of $10,000,000 on a full year basis. However, I do want to provide some color on the projected quarterly impacts. We expect fund revenues will outpace fund expenses will be recorded by approximately $29,000,000 in the back half of the year at approximately $10,000,000 to $15,000,000 per quarter to arrive at our estimated full year underspend Speaker 300:21:18have a record of $10,000,000 which will Speaker 400:21:19complete our recovery of the $49,000,000 investment that we made back in 2020. In closing, our business continues to operate above 2019 levels with additional room for improvement given occupancy levels here in the U. S. And internationally. We produced another quarter of solid adjusted EBITDA and free cash flow, significantly increased capital returns and strengthened our balance sheet and financial have flexibility through the refinancing of our Term Loan B facility. Speaker 400:21:46As we enter the second half of the year, we are confident that our resilient and simplified business model positions us well to deliver on shareholder commitments in any environment. With that, Jeff and I would be happy to take your questions. Operator? Operator00:22:01Have the floor is now open for questions. Have at any point your question has been answered. You may remove yourself from the queue by pressing star 2. Again, we do ask that you limit yourself have to one question and one follow-up. Thank you. Operator00:22:23Our first question comes from Patrick Scholes with Truist Securities. Please go ahead. Speaker 500:22:29Hi. Good morning, Jeff and Michelle. Good morning. Speaker 300:22:37A couple Speaker 500:22:40of questions here. First one, Over the years made strong progress where the retention rate stands at about 95% right now. Speaker 200:22:51To improve that or would Speaker 500:22:52you think of that as a steady state equilibrium? Speaker 200:22:57No. We certainly see opportunity have to improve that rate, Patrick. As you point out, it has moved both domestically and internationally in the right direction and globally, we've moved it from 93% to 94% to over 95%. And just over the last 12 months, we've seen 20 basis points of retention improvement. Our longer term stated goal is to move that to 96%. Speaker 500:23:26Okay, great. And then just two other quick questions here. Michelle, you had mentioned about have programs to assist potential franchisees. Without giving away the secret sauce, if I were a franchisee needing such assistance, what would at a high level some of those programs be? Speaker 400:23:48Yes. Well, Patrick, as you know, our business is highly cash generative and we're always looking for ways are happy to reinvest that cash back into the business. So we're happy to put more money to work when the ROI makes sense for both us and the owner. And typically that has come in the form of Dan's, but we could easily adapt that in the current economic environment, we have a newly implemented program with a reputable lender to source construction financing, for example. We won't disclose have too many details, obviously, as you mentioned for competitive reasons as you can understand, but the program provides a more programmatic approach to financing with Wyndham and obviously provides our franchisees very competitive terms. Speaker 500:24:39Okay, fair enough. And then just last quick question. Jeff, you certainly have talked about a positive tailwind from Federal infrastructure spending. Is there any way to quantify for your business what That how much that may have helped you so far or possibly helped you for the rest of the year? Maybe not quantifiable, but Just curious if you have something. Speaker 200:25:10It absolutely, we believe helped us in the quarter, Patrick. Our Economy saw 200 basis points of weekday RevPAR index outperformance, and it was a mix of both rate and occupancy. We're in, as we've talked about before, the really early innings of what will play out over the next 8 years. And As we've said in our script, we've seen an uptick in inquiries and leads and bookings. But again, it's really early days. Speaker 200:25:38The advance appropriation, I think, for the first $68,000,000,000 becomes available to fund starting later this year. So as we've said, we sized this over the next 5 to 8 years is a $3,000,000,000 revenue opportunity for our franchisees and our owners, and we begin to see it play out as early as this quarter in terms of that mid week RPI outperformance. Speaker 500:26:04Okay. Thank you. So certainly, it sounds like a multiyear tailwind for you folks. Speaker 600:26:10Absolutely. Thank you. Speaker 200:26:11Thanks, Patrick. Operator00:26:14Have a question. Thank you. Our next question comes from Joe Speaker 300:26:19Greff with Speaker 700:26:19JPMorgan. Good morning, everybody. My first question is a 2 parter on development. Nice to see Echo with a chunky hotel signing This month, we look at that as a distinct positive and obviously it speaks to developer demand amid increasing limited service brand competition. What is the value proposition of Echo today versus these competing brands? Speaker 700:26:46And are you marketing positioning, are supporting it differently than say at the initial launch. And then my second part, Jeff Michel, is can you talk about China new developments and new hotel signing activity is it back fully, is it still on recovery mode from a development perspective, not from a RevPAR perspective and not back fully, and how much of second half gross room addition are coming out of China. Speaker 200:27:11Okay. I'll start with Echo and the question on are competitive extended stay launches and are we marketing it any differently, Joe, or not. And we're not seeing any impact. These competitive launches are not are in the range of 20% larger with owe additional Elevator Banks, more larger public spaces, higher amenity requirements and operating costs. Our Echo developers continue to believe that Echo will drive a higher ROI due to much lower cost are key and that's the way we're marketing it. Speaker 200:27:49Lower ongoing operating costs, higher gross operating profits and they believe, we believe that at the 1,800,000 companies out there contracting for accommodations for their infrastructure workers are going to be seeking economy average daily rates with average length of stays approaching over 30 nights versus that mid scale and above average daily rate. It is a very large and underpenetrated segment, as you know, with 15 times fewer hotels in the extended stay Speaker 300:28:19space than transient hotels, and Speaker 200:28:19we think there's plenty of space for continued tell us and we think there's plenty of space for continued room growth there. 2nd part on China in China Development, we were really pleased with the openings, the executions on the development front, we opened another 3,000 direct China rooms this quarter and those came in at 3 times as you know the license fees of our master license agreement. That drove a 4% sequential and a 13% China direct net room growth. We opened 10 new construction hotels have a record of 30 conversion properties. And the 65 new China deals that we signed in the 2nd quarter was 50% more have been a record 41 deals signed back in the Q4 of last year and 40 were direct franchise contracts split pretty evenly between new construction and conversion. Speaker 200:29:12So we're really pleased with what our teams are seeing there in terms of the pick of development opportunities in China. Did I miss anything, Michelle, On Joe's second half. Speaker 400:29:23Again, no, Jeff. I would just say that direct franchising stat you quoted the 40 new deals in the quarter is 90% growth year over year. Speaker 700:29:34Yes, that's you've officially answered it, Jeff. And then My second question and this one might be a little bit more difficult to answer. Someone is going to ask it, so might as well be me. Just over a couple of months ago, the Wall Street Journal reported at that had an interest in you guys. Jeff, have they spoken to you and the Board about a combination? Speaker 700:29:53Has this potentially generated any other interest from other entities, they reached out to you and the Board. We saw buyback activity accelerate in the quarter and some insider selling and maybe that gives us have outside or some indication of how legit this reporting might be, but then we also had this unusual semi pre announcement from Choice this month. Have questions. Speaker 200:30:17Yes. Thanks, Joe. We never comment on speculative news articles. And look, are focused on our business as usual and growing our business. And that's all about what we've been talking about in the script, driving value for our guests, our franchisees and our stakeholders. Speaker 700:30:32Thank you. Speaker 200:30:33Thanks, Joe. Operator00:30:36Thank you. Our next question comes from David Katz with Jefferies. Speaker 800:30:41Hi, good morning everyone. Speaker 500:30:42Good morning, David. Good morning. Speaker 800:30:45So I wanted to just have double back on the pipeline, because it's a point of focus for all of us. And just making sure that deals notwithstanding the one larger one that you announced that deals are entering the pipeline at the same rate that they're passing through the pipeline at the same rate that they're getting financing, etcetera. So any color you can give us on how that backfill is starting progressing for the future would be helpful. Speaker 200:31:21Sure. Thanks, David. They're entering and exiting the pipeline as they always have. As we've talked before, 2 thirds of our openings come out of the pipeline each and every year, we're not seeing any issues there or any changes there. So a larger pipeline, of course, gives us confidence into the future on accelerating our net room growth, as does the improvement as we were just talking about that we continue to make with retention, 80% of the pipeline is now new construction. Speaker 200:31:48And from signing to opening, It usually exits after it enters on average 4 years and the other third, the conversion rooms are averaging less than a year to come out of the pipeline, but this was the 12th consecutive quarter of sequential growth. We were up 10% to last year have a record 230,000 rooms. International signings were up very strongly, up 70% and 5% higher than 2019, and not including in the multi unit contract echo deals that you referenced, we still increased the pipeline 8% globally. 70% of that pipeline is in the midscale and above, 80% of the pipeline is midscale and above if you take out the new EPCO product, And we're not seeing any changes or any slowdown. The new construction pipeline increased to prior year and no slowdown in new construction project starts or any drop off in the percentage of the pipeline rooms now under construction. Speaker 200:32:47Actually, We have more rooms now under construction as the pipeline continues to grow sequentially. So good growth in conversion pipeline have a very strong quarter and just really consistent growth across our international regions with the highest growth coming out, if you look back to pre COVID levels, Europe, Middle East has grown its pipeline by 60% and continues to strengthen and Latin America has grown 70% since before 2019, especially in Mexico and the Doctor. Speaker 800:33:20Have a question. Understood. Thank you. And so for my follow-up, we've all seen the RevPAR numbers in limited service. The lower end chain scales have have shown some RevPAR weakness relative to the total. Speaker 800:33:33I just wonder where you fit into that. And are You feel like you're performing in line, you're able to outperform and if you are, how are you doing it as much as you can tell us? Speaker 400:33:47Yes. I would say, I don't think the lower end chain sales are showing weakness. I know the year over year comps might be a little bit more difficult because they had are covered much faster than their counterparts. If you look actually, if you look at it versus 2019 neutralizing for all that recovery noise, I think they're still the best performing segment in the industry. And I would say in the U. Speaker 400:34:12S. Specifically, we saw growth versus 2019 in the Q2 consistent with what we saw in the Q1. And then Jeff have mentioned in his prepared remarks that we're seeing July accelerate from those 2nd quarter growth rate. So we feel really confident about travel demand throughout the summer season. All of the leading indicators we look at remain Speaker 800:34:52that there is some change in how that industry data is being calculated reported that may be part of what we're seeing? Speaker 400:35:01No, not at all. Speaker 800:35:03Okay. Okay. All right. Thank you very much. Speaker 400:35:06Thank you. Speaker 200:35:08Thanks, David. Operator00:35:10Have a question. Thank you. Our next question comes from Speaker 300:35:14Brandt Montour with Speaker 200:35:15Barclays. Hey, everybody. Speaker 900:35:17Thanks for taking my questions. So great to hear those May, June, July stats for the U. S. I'm curious when you, Michelle, call out the The acceleration in July, just if you could maybe unpack that a little bit. Is it more weekends versus weekdays? Speaker 900:35:36Is there particular strength more on the economy versus midscale and above and any extra color there? Speaker 400:35:45I think we're seeing strength across the board, certainly more weekday strength continuing in from the Q2, but weekends remain very strong. We're seeing pickup in occupancy as well, and then continued ADR, increases Speaker 300:36:03are in line Speaker 400:36:03with what we had seen in the Q2. Speaker 900:36:06Okay. That's helpful. And then, I want to talk about I want to unpack the financing have a comment commentary as well as Slide number 9, which is new. You guys called out not seeing a meaningful impact in terms of availability of capital call for new construction financing. Your larger peers have publicly called out a change there, a lack of availability of capital. Speaker 900:36:32Your slide looks like you did some extra work here over the last 3 months in terms of the mix of community banks and same community banks is are more cycle agnostic with which their lending practices. I guess if you could just put a finer point on that for us. Is the smaller footprint, is the lower chain scale? I guess, do you feel like your brands and your business is essentially a competitive advantage right now versus your broader industry set in terms of acquiring capital for construction. Speaker 400:37:01Yes, I think that's an interesting perspective for Sure. I think what really drives the difference between us and some of the peers is the smaller loan size. Those have always been more can to smaller community banks. And in those banks, it's all about relationships. Our franchisees know their bank presidents by name. Speaker 400:37:21These banks have a deep understanding of the local economies and Of the specific businesses within their communities, you see at community banks, you see loan decisions typically made locally And they're typically made based on a holistic view of the borrower situation, not just one specific will be in the next slide. And not just based on standardized criteria, which is more prevalent in larger banks that are servicing larger loan size. I'll give you a quick example. A few weeks ago, one of our Echo developers secured a loan from a community bank, I think, out in Kansas, a bank that has lent to him multiple times in the past for different business ventures within and outside of the hotel space. And he was able to get 5 year paper at a have 75% loan to cost and a fixed rate of 6.75%. Speaker 400:38:13So if you're just reading the headlines, you wouldn't think that that type of financing exists, but it's very much available at the community bank level. Speaker 600:38:22Excellent. Thank you. Speaker 300:38:26Have a question. Operator00:38:26Thank you. We'll take our next question from Michael Bellisario with Baird. Speaker 600:38:32Thanks. Good morning, everyone. Have just one more on the slide deck, a new slide. You didn't talk about it, but I think it's important that you added back the longer term growth algorithm, have the 8% to 14% range. That's unchanged. Speaker 600:38:46So maybe a couple Speaker 900:38:48of part question here. Speaker 600:38:49How do you think about the drivers today? Why is the range maybe not higher today than it was versus what you last gave in 2019 given all the changes you've made to the business model. And then lastly, the 3% to 5 Cash flow deployment, that's a big input there. Maybe how do you handicap and think about the levers within this bucket? Thanks. Speaker 300:39:11Have a question. Speaker 400:39:11So we've done a lot to simplify the business and we did put the slide back in because we wanted to make sure that everyone understood we're still looking at High single digit, low double digit growth on the EPS line even though we sold our management we exited our management business and sold are owned hotels. So it's a more simple story, same EPS potential. And then we also wanted to show our longer term growth prospects for net room growth at the accelerated 3% to 5% versus the old 2% to 4% pre COVID, Pre simplification. When you think about the 3% to 5% capital deployment, risk there, I think are really low. This business is highly cash are very much generative. Speaker 400:39:56Even in the darkest days of 2020, we were still free cash flow positive and we were free cash flow positive without having to do any forward point sales or anything That was taking from our future cash flow generation capability. So we feel very confident in our ability to generate cash and redeploy that capital to generate sizable EPS growth. Speaker 600:40:20Have Got it. And then just one follow-up on buybacks. Leverage went from 3 to 3.2 if the stock plus or minus remains in the same range. How comfortable are you and where would you lever up to continue buying back stock if it's still at a I think you used significant non warranted discounted level? Speaker 400:40:38We did. I think year to date we've repurchased $165,000,000 And the 2nd quarter repurchases were 2 times the amount we repurchased in the Q1 and that was because we were are leaning in as the stock was trading at a significant unwarranted discount. And If we continue to see it trade at a significant unwarranted discount like it did in the Q2, I think it's fair to expect us have to lean in on share repurchases and we certainly have a tremendous amount of flexibility in the leverage ratio, where we ended the quarter, I think implies over $300,000,000 of additional capacity Before we even move into the upper half of the stated target range. So not going to make any hard commitments today, but you can be assured that we are willing to lean in further if we continue to see a significant unwarranted discount. And you'll note in our earnings release that our Board just approved another $400,000,000 in authorization. Speaker 600:41:46Thanks for the color. Speaker 400:41:49Thank you. Operator00:41:57Our next question comes from Steve Paisella with Deutsche Bank. Speaker 1000:42:03Hey, good morning, everyone, and thanks for taking my questions. The international royalty rate was up nicely year over year, I believe growing 30 basis points. And even the U. S, I think, was up 10 basis points Can you talk about some of the drivers there and how we should think about the royalty rate moving forward? Speaker 400:42:24Have a question. Yes, sure. Jeff, I'll start. Our strategy continues to focus on growing the royalty rate within each region to ensure that we're always building on the and regional equity in the U. S. Speaker 400:42:38Growth on the new construction prototype brands, La Quinta, Microtel and eventually will help us move our domestic rate forward. Of course, remembering a system the size of ours will always move a little bit more gradually given how large it is. Internationally, we see a large opportunity from a royalty rate perspective. We expect the new deals that come into the system will come in at have higher royalty rates than the legacy system in that specific region as we continue to build out our footprint in each market. And as you mentioned, we have seen improvement in our international royalty rate year to date and that is a trend we would expect to continue to see. Speaker 200:43:22And there are so many places for us to grow as Steve oversees. As our brands become more aware in countries and markets like Turkey, for example, where our Ramada was first introduced at a lower royalty rate for sale than it is today, now have 60, 70 hotels in the country. There's tremendous opportunity overseas. We have the most experienced franchise sales team internationally. International continues to be a significant opportunity for us. Speaker 200:43:51There's, as we know, roughly 17,000,000 rooms globally and over 50% of those are unbranded. We have a great value proposition and we're continuing to add countries were no longer, as we've said before, looking to do master license agreement deals internationally, which were these direct franchise deals are always coming in at 3x the royalty rate than the masters were years ago. Speaker 1000:44:29Okay. Thank you. That's helpful. And then you talked about launching and acquiring new brands in your opening remarks. With the success of Echo, can Can you talk about how you view that balance moving forward from maybe acquiring versus launching and any white space you still see in the brand lineup? Speaker 200:44:49Sure. Yes. All of the recent launches we've been really pleased with. We had white space in the all inclusive market and with Playa, have great partner launched Altra by Wyndham and now have a few 1,000 rooms in our pipeline there. Registry collection was a white space for us and without having to go out and acquire a brand, we launched the registry collection. Speaker 200:45:13We now have 17 hotels open and roughly 3,000 rooms in the pipeline and EchoSuite. So we'll continue to look for opportunities like that, but we'll also where opportunities present themselves where we have have markets that have a tuck in opportunity for us as we saw with Vienna House to acquire. And it's a brand that we've got some have really good traction on and are really, really pleased with and is adding some great opportunities for growth for us through in Western and Central Europe along with the Middle East, we don't need to acquire, but when a deal comes along, it's immediately accretive to where we're trading at today will absolutely look at it. Speaker 1000:46:05Okay, great. Thank you. Speaker 200:46:08Have a question. Operator00:46:10Thank you. At this time, we have no further questions in queue. I will now turn the floor back to Jeff Bellotti for any additional or closing remarks. Speaker 200:46:19Well, thanks everybody for your questions and your interest in Wyndham Hotels and Resorts. We were, as Michelle said very pleased with our Q2, where we delivered adjusted EBITDA growth that outperformed expectations. Our teams couldn't be more enthusiastic think about the opportunities that lie ahead, and we're very confident in our ability to deliver outstanding value to our shareholders, our guests and our franchisees. Michelle, Matt and I Speaker 1000:46:43look forward to talking to Speaker 500:46:44you and seeing many of Speaker 200:46:44you in the weeks and the months ahead at many of the upcoming investor conferences that we'll be attending. But before we go, we'd like to remind everybody please tune into the 84th Annual Wyndham Championship from August 3rd through August 6th next week, which will be airing on CBS and the Golf Channel with live coverage beginning on Thursday of next week. Thanks again everybody and have a great day. Speaker 300:47:08Have a question. Operator00:47:08Thank you. This does conclude today's Wyndham Hotels and Resorts Second Quarter 2023 Earnings Conference Call. Please disconnect your line at this time and have a wonderful day. Speaker 800:47:21Thanks, Todd.Read morePowered by