Wyndham Hotels & Resorts(WH) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a strong finish for the year with net room growth of 4% and comparable adjusted EBITDA and EPS growth of 7% and 10% respectively [9] - Adjusted EBITDA increased 12% on a comparable basis, driven by higher fee-related revenues and ongoing margin expansion [36] - Adjusted diluted EPS grew 18% on a comparable basis to $1.04, reflecting adjusted EBITDA growth and share repurchase activity [37] Business Line Data and Key Metrics Changes - The company opened a record 69,000 rooms, the largest number of annual organic room additions in its history, representing a 4% increase from last year [10] - The ECHO Suites brand showed strong performance in new markets, with operating performance exceeding owner expectations [11] - The extended stay market is projected to grow nearly 30% from$ 21 billion in 2024 to $27 billion by 2028, with ECHO Suites, Hawthorn Suites, WaterWalk, and Wyndham Residences representing nearly one-third of the domestic development pipeline [12] Market Data and Key Metrics Changes - U.S. RevPAR in the fourth quarter grew by 5.3%, with a 140 basis point contribution from hurricane impacts [16] - Internationally, RevPAR grew by 6% year-over-year in constant currency, with Latin America seeing a 32% increase [22] - In China, RevPAR declined 11%, but the direct franchising system grew 16% with over 60 openings in the quarter [23][15] Company Strategy and Development Direction - The company is focusing on accelerating the growth of its direct franchising brands internationally, which are expected to drive sustainable growth [16] - The development strategy targets significantly higher FeePAR additions to the portfolio, with a focus on midscale and above properties [40] - The marketing strategy aims to attract younger and more affluent customers, with a growing share of check-ins from higher-income guests [25] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving 2025 goals, highlighting strong development momentum and continued royalty rate expansion [32] - The outlook for 2025 includes global net room growth of 3.6% to 4.6% and RevPAR growth of 2% to 3% on a constant currency basis [44] - Management noted that U.S. leisure travel intentions have increased year-over-year across all income brackets, reflecting broad-based confidence in travel and the economy [21] Other Important Information - The company returned$ 430 million to shareholders in 2024, representing 6% of its market cap [42] - The Board of Directors authorized an 8% increase to the quarterly cash dividend, raising it to $0.41 per share [43] - The company expects adjusted EBITDA growth of 7% to 9% in 2025, with adjusted net income projected at$ 369 million to $379 million [49] Q&A Session Summary Question: Development guidance and net unit growth - Management indicated that the net room growth guidance reflects expectations to accelerate growth, with new construction expected to be a larger portion of net room growth in 2025 [56][58] Question: Key money investments and returns - Management confirmed that they are seeing higher returns on key money investments, with those properties bringing in FeePAR premiums of 40% compared to those without [62] Question: Pipeline and FeePAR premium impact - Management stated that the higher FeePAR strategy is expected to contribute to RevPAR growth and outperformance in 2025 [66][68] Question: Credit card fee stream growth - Management expects ancillary revenue growth to be in the low teens range in 2025, driven by the renewal of the Barclays credit card agreement [78] Question: RevPAR environment needed for growth - Management indicated that they expect RevPAR to improve from flat last year to up about three points this year, which is necessary for achieving the 8.5% adjusted EBITDA CAGR [96] Question: Hurricane impact on RevPAR guidance - Management clarified that they have adjusted hurricane benefits out of their RevPAR guidance for 2025, accounting for a 30 basis point headwind [90][93]