Oil markets are still down significantly in year-to-year comparisons, but officials with Wyndham Worldwide said they are getting marginally better from quarter to quarter.
PARSIPPANY, New Jersey—Weakness in oil markets continues to drag down overall performance for Wyndham Hotel Group, but company officials believe there might be light at the end of the tunnel.
On Wednesday during the company’s second-quarter earnings conference call, Wyndham Worldwide officials said revenue per available room was down 16% in oil-driven markets compared to Q2 2015. While that is clearly bad news, they said the silver lining is RevPAR in those markets was down 20% in the first quarter of 2016, so there are signs the negative impact is decelerating.
“We think there is probably some lessening of the impact,” said Wyndham Worldwide CEO and Chairman Stephen Holmes.
Overall, the company saw 2% domestic RevPAR growth in the second quarter, or a 0.6% decrease in systemwide RevPAR if viewed in constant currency. Wyndham officials attributed that weak performance to both U.S. and Canadian domestic markets, coupled with unit growth in low RevPAR environments like China.
CFO Thomas Conforti said the company saw RevPAR growth of 3.3% outside of oil markets, and their overall growth numbers should improve later in the year as year-to-year comparisons for oil markets become more favorable.
Holmes said the company saw oil markets moving in the right direction even within the second quarter.
“May and June were better than April,” he said. “So there was sequential improvement.”
Holmes said there are other signs that inspire optimism for the remainder of 2016, including a growing global middle class that seems to favor the midscale and economy properties that Wyndham counts among its brands.
Wyndham’s net income ($156 million) and revenue ($1.4 billion) remained virtually flat year over year. Earnings before interest, taxes, depreciation and amortization grew 5% to $101 million for the hotel group and 2% to $340 million for the overall company.
Wyndham officials also announced they repurchased 2.1 million shares of common stock during the quarter for $150 million.
The company’s stock was trading down 7.6% Wednesday morning to $71.20, which was also down 1.76% year to date. The Baird/STR Hotel Stock Index was at $3,311.22 at the same time, up 6.7% for the year.
No impact from Brexit
Company officials said they’re optimistic that Brexit won’t have a demonstrable impact on their operations, largely because operations in the U.K. are largely reliant on low-cost travelers who travel domestically.
“Most of our (rentals and bookings) in the U.K. are made by U.K. consumers,” Holmes said. “And the same is true of continental Europeans.”
Holmes said Wyndham’s properties do well during economic turmoil because of their value proposition. He said the dynamics of Brexit might actually work out well for the company if consumers view the U.K. as a value destination due to the devaluation of the pound.
Conforti said foreign exchange, including the U.K. pound and the unexpected fluctuations of the Venezuelan currency, did have a negative impact on some of the company’s cash flow.