On your mark, get set, go! That could be the motto for what’s currently going on in the hospitality segment, as lodging companies introduce new extended-stay products they hope capture the way the world is now traveling. Developers seem to like it, too.
A day after Hilton reported strong earnings, and underscored its new extended-stay brand, named Project H3 in the interim, Wyndham Hotels & Resorts posted its Q2 earnings, also touting its new extended-stay brand, which does have an official name: ECHO Suites Extended Stay by Wyndham. The brand was launched in November of 2022 and now has 265 contracts, according to Wyndham, including 60 new construction projects awarded in July, including its first hotels in Canada.
For comparison, on Hilton’s Q2 call, President and CEO Chris Nassetta said Project H3, which launched in May, has more than 300 deals in negotiation. Project H3 joins Homewood Suites and Home2 Suites as Hilton’s third extended-stay brand. The company opened its 600th Home2 in the second quarter.
As of June 30, 2023, Wyndham’s global development pipeline consisted of nearly 1,850 hotels and approximately 228,000 rooms, representing a 10% YOY increase, including 22% growth in the U.S. Approximately 72% of the company’s pipeline is in the midscale and above segments; approximately 57% of the company’s development pipeline is international; and approximately 81% of the company’s pipeline is new construction, of which approximately 35% has broken ground.
BY THE NUMBERS
Wyndham’s Q2 performance echoed Hilton’s. Global RevPAR grew 7% compared to the same time a year ago, while system-wide rooms grew 4% year-over-year. Its development pipeline grew 1% sequentially, with signings of rooms totaling 24,000, growth of 6% YOY and 7% compared to 2019.
Though performance indicators were healthy, net income was expectedly down, the company said, impacted by marketing-related activities, higher interest expense and transaction-related costs primarily related to the company’s refinancing of its Term Loan B Facility. Wyndham Hotels & Resorts generated net income of $70 million compared to $92 million in the second quarter of 2022.
Adjusted EBITDA was $158 million compared to $175 million in second quarter 2022.
Fee-related and other revenues was $358 million compared to $354 million in second quarter 2022, which included $12 million from the company’s select-service management business and owned hotels. On a comparable basis, fee-related and other revenues increased 5% YOY primarily reflecting higher royalties and franchise fees resulting from global RevPAR and system growth.
“During the second quarter, we celebrated the tremendous progress we’ve made in our five-year journey as a new public company with another quarter of solid results including global RevPAR growth of 7%, net room growth of 4% and the 12th consecutive quarter of sequential growth in our development pipeline, which has never been stronger,” said Geoff Ballotti, president and CEO of Wyndham Hotels & Resorts. “International travel demand continues to accelerate, our U.S. economy brands continue to outperform the industry and our nation’s infrastructure bill spend is expected to represent a meaningful tailwind for our franchisees in the months and years ahead. We remain very confident in our ability to deliver outstanding value for our franchisees and shareholders, as does our Board of Directors who today approved a $400 million increase in our share repurchase authorization, reflecting their confidence in the ongoing strength of our business and our strong free cash flow.”