Wyndham Hotels & Resorts reported a strong first quarter, with its global development pipeline climbing 8%. Riding on increased interest from owners, its development pipeline touched a record 243,000 rooms. The quarter saw progress in new openings, franchisee retention and net room growth across the globe, the company said during the earnings call on Thursday. This is the 15th consecutive quarter of sequential pipeline growth for the company.
The Parsippany, N.J.-based lodging company opened 13,000 rooms, accounting for a 27% YOY increase. Global system was up 4%, reflecting 1% growth in the U.S. and 8% globally. These increases included strong growth in both the higher RevPAR midscale and above segments in the U.S. and direct franchising business in China, which rose 3% and 13%, respectively.
RevPAR improved 1% in constant currency from 2023, reflecting a 5% slip in the U.S. and a 14% growth internationally. Wyndham completed its most difficult YOY comparisons in the U.S. in the first quarter, which led to a decline of 440 basis points in occupancy and 50 basis points in ADR.
Across the world, Wyndham saw YOY RevPAR increasing in all other regions mostly driven by continued pricing power, with ADR climbing 12% and occupancy increasing by 2%.
The company ventured into the extended-stay segment earlier this month through its strategic partnership with WaterWalk, a “strong, upscale brand with a great pedigree,” said Geoff Ballotti, Wyndham’s president and chief executive officer, during the earnings call.
“This is a great upscale complement to our economy and midscale extended segment. It’s both conversion and new-build opportunities for us,” Ballotti said. While the brand does not have a pipeline today, Wyndham is looking to aggressively its extended stay segment. “Demand is building and our franchise teams will look to grow this brand. And it adds an upscale extended stay brand for us to sell that we haven’t had to sell previously.”
Wyndham is optimistic on achieving its net room growth outlook of 3-4% for 2024, including an increase in its retention rate compared to 2023.
Most of its pipeline (69%) is in the midscale and above segments, which saw a 4% YOY growth. Approximately 79% of the pipeline consists of new-build projects, of which 35% has broken ground. Of the total pipeline, 58% is international.
Net income slid to $16 million, down from $67 million in Q1 2023. The decline reflects transaction-related expenses resulting in the failed, $8-billion takeover bid by Choice Hotels. The impairment charge was mostly related to “development advance notes and higher interest expense,” Wyndham said.
Ballotti thanked franchisees and team members for their “commitment and support” over the past month throughout Choice’s hostile efforts to acquire the company.
Adjusted EBITDA also fell to $141 million, from $147 million in Q1 2023. The decrease included a $10 million “unfavorable impact” from marketing fund variability. Excluding this, adjusted EBITDA was up 3%.
“Our strong balance sheet and cash flow generation capabilities provide significant opportunity to continue to enhance returns to our shareholders over both the short and long-term, as evidenced by our board of directors’ approval of a $400 million increase in our share repurchase authorization,” Ballotti said.