Wyndham Hotels & Resorts(US:WH)2024-07-25 19:17Financial Data and Key Metrics Changes - The company reported a 6% growth in comparable adjusted EBITDA and a 12% increase in adjusted diluted EPS for Q2 2024 [8][33] - Adjusted free cash flow was $69 million for the quarter and $171 million year-to-date, with a conversion rate from adjusted EBITDA of 54% [34] - The company returned over $250 million to shareholders year-to-date, including $131 million in share repurchases during Q2 [9][36] Business Line Data and Key Metrics Changes - The company opened over 18,000 rooms in Q2, a 16% increase in domestic openings compared to last year [10] - Domestic net room growth was driven by a 3% increase in midscale and above brands [11] - Internationally, net rooms grew by 8% year-over-year, with significant growth in EMEA and Latin America [13][21] Market Data and Key Metrics Changes - US RevPAR grew by 30 basis points year-over-year, with domestic occupancy finishing a point ahead of the prior year [18] - International RevPAR increased by 7% year-over-year in constant currency, with EMEA and Latin America showing strong growth of 15% and 37% respectively [21] - The company noted that occupancy in the US improved by 1% compared to the previous year, indicating a recovery trend [18][108] Company Strategy and Development Direction - The company is focused on expanding its development pipeline, which grew to a record 245,000 rooms, with a 33% increase in development deals signed in Q2 [10][56] - The introduction of the Wyndham Connect guest engagement platform aims to enhance guest experiences and drive ancillary revenue [23][26] - The company is committed to maintaining a strong balance sheet while pursuing growth opportunities, with a target leverage ratio of 3.5 times [39][85] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the recovery of the select service segments, projecting a 2.7% US RevPAR growth in 2025 [20] - The company anticipates flat year-over-year RevPAR growth for 2024, with adjusted EBITDA guidance remaining unchanged [40][41] - Management highlighted the resilience of the business model, emphasizing the ability to generate cash flow even in a softer RevPAR environment [47] Other Important Information - The company successfully repriced its Term Loan B, generating annual interest savings of approximately $6 million [39] - The marketing fund is expected to generate revenues that will outpace expenses in the second half of the year, offsetting first-half overspending [46] - The company reaffirmed its multi-year outlook through 2026, projecting an adjusted EBITDA CAGR of 7% to 10% [48] Q&A Session Summary Question: What is the outlook for rooms growth? - Management indicated that the current 4% growth is not the floor, with optimism for future growth driven by a strong pipeline and increased receptiveness from developers [50][56] Question: Can you elaborate on the updated RevPAR outlook? - The company expects similar trends in the US, with modest improvements in China and overall efficiency gains contributing to maintaining EBITDA guidance despite RevPAR reductions [59][62] Question: What is driving the increase in royalty rates? - The improvement in royalty rates is attributed to the signing of higher fee deals and the successful efforts of franchise sales and development teams [78][80] Question: How is the company addressing operating expenses in light of RevPAR trends? - Management has been disciplined with costs, reprioritizing investments based on expected RevPAR growth, and is flexible in adjusting spending as needed [125] Question: What is the strategy for the ECHO Suites brand? - The company is seeing significant interest and positive feedback from developers regarding the ECHO Suites, indicating a strong growth trajectory for this brand [99][102]