Wyndham Hotels & Resorts has announced results for the three months and year ended December 31, 2023. Highlights include:
• System-wide rooms grew organically by 3.5 per cent year-over-year, a record high.
• Opened a record 66,000 organic rooms, representing a year-over-year increase of 3 per cent.
• Global retention rate - including all terminations - improved another 30 basis points to a record 95.6 per cent.
• Development pipeline grew 1 per cent sequentially and by 10 per cent year-over-year to a record 240,000 rooms.
• Grew ECHO Suites pipeline nearly 60 per cent year-over-year with 98 new contract signings.
• Signed 766 contracts for legacy brands, an increase of 8 per cent year-over-year.
• Fourth quarter diluted earnings per share of $0.60 and net income of $50 million; adjusted diluted EPS of $0.91, adjusted net income of $75 million and adjusted EBITDA of $154 million.
• Full-year 2023 diluted EPS of $3.41 and net income of $289 million; adjusted diluted EPS of $4.01, adjusted net income of $341 million and adjusted EBITDA of $659 million.
• Net cash provided by operating activities of $376 million and free cash flow of $339 million for the full-year.
• Returned $515 million to shareholders for the full-year through $397 million of share repurchases and quarterly cash dividends of $0.35 per share.
• Board of Directors recently authorized a 9 per cent increase in the quarterly cash dividend to $0.38 per share beginning with the dividend expected to be declared in the first quarter 2024.
“We are tremendously proud to report fourth quarter results that demonstrate the continued success of our global strategy and our accelerating momentum,” says Geoff Ballotti, president and chief executive officer. “Despite the distraction, uncertainty and misperceptions caused by Choice and their slanted and constant communications to our franchisee base, room openings accelerated and our global development pipeline grew by 10 per cent to an all-time high of 240,000 rooms. Our team opened 27 per cent more rooms than last year in the fourth quarter and we welcomed 500 new hotels to our system in 2023. This, when combined with our improving franchisee engagement and record retention rate, drove the best organic system growth we’ve ever achieved. We grew comparable adjusted EBITDA by 6 per cent and returned over half a billion dollars to our shareholders through dividends and share repurchases. We are confident in the continued effectiveness of our growth strategy and see exceptional value-creation opportunities in the years ahead.”
The Company’s global system grew 3.5 per cent, marking 12 consecutive quarters of organic growth and reflecting 1 per cent growth in the U.S. and 7 per cent internationally. As expected, these increases included strong growth in both the higher RevPAR midscale and above segments in the U.S. and the direct franchising business in China, which grew 3 per cent and 13 per cent, respectively. The Company also increased its retention rate, which includes all terminations, by another 30 basis points year-over-year, ending the year at a record 95.6 per cent.
On December 31, 2023, the Company’s global development pipeline consisted of over 1,950 hotels and approximately 240,000 rooms, representing another record-high level and a 10 per cent year-over-year increase. Key highlights include:
• 14th consecutive quarter of sequential pipeline growth
• 8 per cent growth in the U.S. and 11 per cent internationally
• Approximately 70 per cent of the pipeline is in the midscale and above segments, which grew 6 per cent year-over-year
• Approximately 58 per cent of the pipeline is international
• Approximately 79 per cent of the pipeline is new construction, of which approximately 34 per cent has broken ground
• The Company awarded 766 new contracts for its legacy brands in full-year 2023, an increase of 8 per cent compared to full-year 2022. Additionally, the Company awarded 98 additional new contracts for its ECHO Suites brand and, as of December 31, 2023, the Company had awarded 268 contracts, or over 33,000 rooms, for the brand.
Fourth quarter global RevPAR declined 1 per cent in constant currency compared to 2022 reflecting a 4 per cent decline in the U.S. and growth of 7 per cent internationally. For the full year, global RevPAR grew 5 per cent in constant currency compared to 2022 reflecting a 1 per cent decline in the U.S. and growth of 21 per cent internationally.
The Company had achieved record-breaking RevPAR in the U.S. during the preceding year due to COVID-impacted travel patterns. Comparing to 2019 to neutralize for COVID-impacted travel patterns, U.S. RevPAR grew 10 per cent in fourth quarter - a 120 basis point acceleration from third quarter 2023 growth - and 9 per cent for the full year. Internationally, year-over-year RevPAR growth for both the fourth quarter and the full-year was primarily driven by higher occupancy levels. Compared to 2019, international RevPAR grew in fourth quarter and full-year by 44 per cent and 36 per cent, respectively, on a constant-currency basis.
Operating Results
Fourth Quarter
• Fee-related and other revenues was $320 million compared to $310 million in fourth quarter 2022 reflecting global net room growth as well as higher license and ancillary fees.
• The Company generated net income of $50 million compared to $56 million in fourth quarter 2022. The decrease was reflective of a higher effective tax rate, higher interest expense, foreign currency impact from hyper-inflation in Argentina and transaction-related expenses resulting from the unsolicited offer by Choice Hotels, partially offset by higher adjusted EBITDA.
• Adjusted EBITDA grew 22 per cent to $154 million from $126 million. This increase included a $21 million favourable impact from marketing fund variability, excluding which adjusted EBITDA grew 6 per cent primarily reflecting higher fee-related and other revenues.
• Diluted earnings per share was $0.60 compared to $0.63 in fourth quarter 2022. This decrease reflects lower net income, partially offset by the benefit of a lower share count due to share repurchase activity.
• Adjusted diluted EPS grew 26 per cent to $0.91 per share from $0.72 per share. This increase included $0.19 per share related to the favorable marketing fund variability (after estimated taxes), excluding which adjusted diluted EPS was unchanged year-over-year as adjusted EBITDA growth and the benefit from share repurchase activity was substantially offset by higher interest expense.
• During fourth quarter 2023, the Company’s marketing fund revenues exceeded expenses by $9 million; while in fourth quarter 2022, the Company’s marketing fund expenses exceeded revenues by $12 million, resulting in $21 million of marketing fund variability.
Full Year
• Fee-related and other revenues was $1,384 million compared to $1,354 million in full-year 2022, which included $50 million from the Company’s select service management business and owned hotels, which were exited in 2022. On a comparable basis, fee-related and other revenues increased 6 per cent year-over-year primarily reflecting global RevPAR and net room growth, higher license and ancillary fees and pass-through revenues associated with the Company’s global franchisee conference in September, which was held for the first time since 2019.
• The Company generated net income of $289 million compared to $355 million in full-year 2022, which included $37 million from the select-service managed and owned hotels. The decrease was reflective of a higher effective tax rate, higher interest expense, foreign currency impact from hyper-inflation in Argentina and transaction-related expenses resulting from the unsolicited offer by Choice Hotels, partially offset by higher adjusted EBITDA.
• Adjusted EBITDA was $659 million compared to $650 million in full-year 2022, which included $18 million from the select-service managed and owned hotels. The growth in adjusted EBITDA was further impacted by $11 million of unfavourable marketing fund variability. On a comparable basis, adjusted EBITDA increased 6 per cent reflecting higher fee-related and other revenues.
• Diluted earnings per share was $3.41 compared to $3.91 in full-year 2022, which included $0.40 per share from the select-service managed and owned hotels. This decrease reflects the lower net income, partially offset by the benefit of a lower share count due to share repurchase activity.
• Adjusted diluted EPS was $4.01 per share compared to $3.96 per share in full-year 2022, which included $0.15 per share from the select-service managed and owned hotels. This growth in adjusted diluted EPS was further impacted by $0.09 per share (after estimated taxes) of unfavourable marketing fund variability. On a comparable basis, adjusted diluted EPS increased 8 per cent year-over-year reflecting the adjusted EBITDA growth and the benefit from share repurchase activity, partially offset by higher interest expense.
• During full-year 2023, the Company’s marketing fund revenues exceeded expenses by $9 million; while in 2022, the Company’s marketing fund revenues exceeded expenses by $20 million, resulting in $11 million of marketing fund variability.
Balance Sheet and Liquidity
The Company generated $376 million of net cash provided by operating activities and free cash flow of $339 million in the full-year 2023. The Company ended the quarter with a cash balance of $66 million and approximately $650 million in total liquidity.
The Company’s net debt leverage ratio was 3.2 times at December 31, 2023, within the lower half of the Company’s 3 to 4 times stated target range.
Share Repurchases and Dividends
During the fourth quarter, the Company repurchased approximately 1.7 million shares of its common stock for $127 million. For the full-year 2023, the Company repurchased approximately 5.5 million shares of its common stock for $397 million, at an average price of $72.25, 8 per cent lower than trading levels as of February 13th.
The Company paid common stock dividends of $28 million, or $0.35 per share, in the fourth quarter of 2023 for a total of $118 million, or $1.40 per share, for the full-year 2023.
For the full-year 2023, the Company returned $515 million to shareholders through share repurchases and quarterly cash dividends.
The Company’s Board of Directors authorized a 9 per cent increase in the quarterly cash dividend to $0.38 per share, beginning with the dividend expected to be declared in first quarter 2024.
Full-Year 2024 Outlook
The Company provided the following outlook for full-year 2024:
The Ontario government has given the green light to Niagara Parks Commission (NPC) to redevelop the Toronto Power Generating Station (TPGS) into a five-star boutique hotel near the brink of Niagara Falls.
Mundi Hotel Enterprises Inc. has added a prominent property to its portfolio with the acquisition of the hotel component in Highline Metrotown, a mixed-use tower in Burnaby, British Columbia.
Taylor Swift’s Eras Tour kicked off its Canadian leg on November 14, 2024, at Toronto’s Rogers Centre, the first of six sold-out performances that will draw tens of thousands of fans nightly.
As 2024 progresses, the Canadian hotel industry is navigating a shifting economic landscape characterized by inflation, fluctuating interest rates, and moderated demand growth. Cushman & Wakefield’s latest report,…
