Wyndham touts global rooms growth in Q2
 
Wyndham touts global rooms growth in Q2
25 JULY 2019 9:36 AM

During the second quarter, Wyndham Hotels & Resorts opened more than 7,500 rooms in the U.S. and more than 20,000 internationally.

PARSIPPANY, New Jersey—Despite seeing a softening of demand, primarily in its U.S. markets, Wyndham Hotels & Resorts executives are excited about the company’s ability and potential to organically grow its rooms count on a global scale.

Wyndham reported its fifth consecutive quarter of net rooms growth in the U.S. in Q2 2019, executives said on a call with analysts to discuss the company’s quarterly earnings report.

“We opened more than 7,500 domestic rooms in Q2, an increase of 11% versus the same quarter last year,” Wyndham President and CEO Geoff Ballotti said. That includes 1,300 rooms at 14 La Quinta properties across nine states.

Internationally, Wyndham’s systemwide rooms grew by more than 20,000, a 7% increase over Q2 2018. The fastest-growing regions for the company were Southeast Asia, where room count grew by 22% in the quarter, and Latin America, where rooms growth was 7%. In China alone, the company’s direct franchise system grew by 10% in the quarter, and approximately 500 hotel openings are planned over the next three years, Ballotti said.

“In the Europe, Middle East, Eurasia and Africa regions, we opened nearly two-and-a-half times as many rooms this quarter as the same period last year,” including 50% more rooms in Latin America and 30% more rooms in China, he said, noting that “the rapidly expanding population of traveling middle class in international markets represents a major growth opportunity for Wyndham over the next decade.”

Wyndham’s net rooms grew 3% year over year to 816,600 rooms at nearly 9,200 properties as of 30 June, despite 21,100 systemwide room deletions during the first half of 2019.

The company has a development pipeline of approximately 1,400 hotels and 188,000 rooms, a 10% increase from the second quarter of 2018 and 4% increase from the first quarter of 2019. New construction accounts for nearly three-quarters (74%) of the development pipeline, and more than half (55%) is international.

Another factor benefiting rooms growth has been Wyndham’s focus on improving its rooms retention rate and reducing rooms deletions. The company reported systemwide rooms retention rate of 96%, and an 8% year-over-year reduction in second-quarter room terminations.

“Our retention rate has been going up as our attrition rate is coming down, and there is opportunity to continue to improve,” Ballotti said. “We expressed a desire to move from 93% (rooms retention rate) to 94% last year, and said we wanted to get to 95% this year. Being able to reduce attrition domestically was huge for us. To move to 95% (retention) internationally was also considerable. Our goal is to move it up another point.”

Q2 performance
Wyndham reported systemwide revenue per available room in the second quarter increased 3% year over year to $44.06. RevPAR for the company’s U.S. portfolio increased 5% year-over-year to $50.98.

Excluding acquisitions and divestitures, U.S. RevPAR and constant-currency global RevPAR “increased a fraction of a point in the second quarter 2019 compared to the prior-year period,” according to the company’s earnings release.

Tough comps in markets which saw significant post-hurricane demand in Q2 2018 dragged down results this quarter, according to Wyndham CFO David Wyshner. The company’s La Quinta portfolio particularly was hit by tough hurricane comps, as RevPAR growth of 6% in Q2 2018 turned into a RevPAR decline of 5% this quarter.

Adjusted earnings before interest, taxes, depreciation and amortization increased 27% to $159 million, buoyed in part by the company’s hotel franchising operations, for which adjusted EBITDA grew 26% year over year to $162 million.

Net income for the quarter was $26 million, up 24% from the same quarter last year. Adjusted net income was $82 million, a 12% increase year over year. The company reported 23% growth in revenue to $533 million for the quarter.

Wyndham revised its outlook for full-year 2019 to approximately 1% global RevPAR growth (down from a range of 1% to 3% growth), revenue of $2.05 billion to $2.08 billion (down from $2.11 billion to $2.16 billion), adjusted EBITDA of between $610 million to $618 million (from $605 million to $620 million) and adjusted net income of $308 million to $315 million (up from $301 million to $313 million).

Regarding the more conservative RevPAR forecast, Wyshner said, “Our biggest issue has been in the U.S. That’s where were seeing some softness (in demand).”

“International regions are performing well, and are not a driver of it,” he said.

At press time, Wyndham Hotels & Resorts’ stock was trading at $58.00, up 28.8% year to date. The Baird/STR Hotel Stock Index was up 16.6% for the same period.

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