Wyndham execs warn of longer-term hurricane effects
 
Wyndham execs warn of longer-term hurricane effects
25 OCTOBER 2017 9:54 AM

Weather events in the third quarter are having an adverse effect on performance, but Wyndham Hotel Group executives remain optimistic about growth potential the hotel group ahead of a spinoff from its timeshare business.

PARSIPPANY, New Jersey—Despite hurricanes that had a negative impact on Wyndham Hotel Group properties in Florida, the Caribbean and Puerto Rico during the third quarter, the company reported growth “in line with expectations.” Executives told analysts during a Q3 earnings call the storms are expected to drag down fourth-quarter and full-year results.

“Certainly weather events happen from time to time, but the number and magnitude of events in the third quarter were unusual,” said Wyndham Worldwide EVP and CFO David Wyshner.

Company officials said the hurricanes led to declines of $13 million in revenue, $6 million in net income and $9 million in earnings before interest, taxes, depreciation and amortization.

“The reductions primarily reflect the temporary closure of vacation ownership sales centers in the Caribbean and Florida, the closure of portions of the … Wyndham Rio Mar hotel in Puerto Rico, and reduced timeshare exchanges due to travel disruptions,” according to a company news release.

“Hurricane Maria left our Rio Mar property in Puerto Rico needing significant repairs, and the rooms we currently are able to use are primarily occupied by emergency relief workers, which is lower-margin business,” Wyshner said.

As a result of the negative impact of the hurricanes, Wyndham revised its guidance for fourth-quarter and full-year performance. The company says weather-related events pushed down Q4 revenue estimates by $20 million to $30 million and net income estimates by $9 million to $15 million. Full-year revenues are expected to land between $5.8 billion and $5.85 billion and adjust net income is projected between $618 million and $628 million.

The company stated in a news release that while “business interruption insurance may ultimately offset a portion of these events, any such insurance recoveries are unlikely to be realized in 2017.”

Q3 performance
Still, the company managed to meet expectations for the third-quarter, Wyndham Worldwide Chairman and CEO Stephen P. Holmes said, due to “efforts to drive revenue and control costs.”

“Our team’s sharp focus on executing against our strategic and operating plans allowed us to deliver solid growth in line with our prior projections,” he said.

For the third quarter, Wyndham reported revenues of $1.6 billion for the quarter, up 4% year-over-year, and net income of $203 million, up 3.6% from $196 million in Q3 2016. Wyndham Hotel Group reported revenue of $368 million, up 1.1% from $368 million in the same quarter in 2016.

Revenue per available room increased 2.3% domestically and 3.3% globally year over year on a constant currency basis. Average occupancy for the quarter was 61%, up 1.8% year-over-year, and average daily rate grew 1.3% to $72.75.

Wyndham reported 3% growth in its hotel system, which as of 30 September was comprised of more than 8,100 properties with more than 708,500 rooms. Nearly 1,190 hotels, representing more than 146,900 rooms, are in the development pipeline—a 10% year-over-year increase. Of those projects, 57% are international, and 68% are new construction, according to the company news release.

Split and strength
The split of Wyndham Hotel Group and the timeshare businesses, Wyndham Vacation Ownership and Wyndham Destination Network, into separate publicly traded companies is on track to be completed in the second quarter of 2018, executives said. Holmes added it “should be several months before we have something definitive to say about the outcomes of these efforts.”

Wyndham Hotel Group President and CEO Geoff Ballotti said momentum is strong heading into the split. This is evidenced, he said, by the company’s acquisition of AmericInn, which closed in October, expanding Wyndham’s “base in the midscale segment with over 200 high-quality hotels” and adding nearly 12,000 rooms to the hotel portfolio.

Ballotti credited the strength of the company’s hotel brands, as well as a “laser-focus on three areas”: quality, technology and loyalty.

“We’ve grown to become the company that operates more hotels than any other organization in the world with over 8,300 franchised hotels operating under one of our 20 well-known brands today,” he said. “We have an exceptionally strong footprint with 40% of the economy hotels in the United States flying one of our flags.”

He singled out Super 8, Days Inn and Ramada as the company’s “largest and most international brands,” which “in aggregate operate in 68 countries around the world and enjoy brand awareness of over 75%.”

Wyndham Worldwide’s stock was up 37.2% year to date as of press time. The Baird/STR Hotel Stock Index was up 29.8% for the same time period.

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