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Wyndham Hotels & Resorts(WH) - 2021 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Global Rev PAR increased by 110% compared to the previous year, with domestic economy Rev PAR exceeding 2019 levels by nearly 4% [7] - Adjusted EBITDA for the quarter was $168 million, surpassing the second quarter of 2019 [8] - Free cash flow for the quarter was $104 million, an increase of $264 million from the second quarter of 2019 [9] - Adjusted diluted earnings per share was $0.95, improving by 30% from 2019 [37] - The company ended the quarter with approximately $840 million of liquidity and an annualized net leverage ratio of 2.2 times [38] Business Line Data and Key Metrics Changes - The economy brands led the recovery in the U.S., with occupancy levels consistent with 2019 and ADR up 4% [30] - Midscale brands had occupancy down only 9% and ADR up 1% [31] - The company opened 9,800 rooms, which was nearly 30% more than the first quarter and over 70% more than last year [9][10] Market Data and Key Metrics Changes - In China, Rev PAR was down only 7%, showing improvement from a 25% decline in the first quarter [32] - EMEA region Rev PAR was down 68% due to travel restrictions, while Canada saw a 49% decline [33] - Domestic Rev PAR for June exceeded 2019 levels, with a 7% increase for economy brands compared to 2019 [13] Company Strategy and Development Direction - The company plans to target longer weekend getaways and mid-week leisure vacations, focusing on attracting younger consumers [19] - The development pipeline grew to over 190,000 rooms, with significant growth in China and Latin America [10][25] - The company aims to increase capital deployment to support future growth, with a focus on attracting new developers [65] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the recovery, particularly in the U.S. and China, and provided a full-year outlook for 2021 [40] - The company expects adjusted EBITDA of $525 million to $535 million, representing approximately 85% of 2019 levels [40] - Management noted that leisure demand is expected to remain strong into the fall, driven by pent-up demand [99] Other Important Information - The company has increased its quarterly cash dividend to $0.24, restoring it to 75% of pre-pandemic levels [39] - The company received recognition for its ESG efforts, achieving a best-in-class level of disclosure [27] Q&A Session Summary Question: Thoughts on capital returns and dividend increase - Management indicated that the dividend increase aligns with earnings recovery and capital allocation priorities [46][47] Question: Impact of largest franchisee exploring alternatives - Management anticipates that core hotels will remain part of the Wyndham family despite the franchisee's changes [48] Question: Net earnings growth targets and room openings - Management expressed confidence in achieving room growth targets, with expectations to open over 50,000 rooms this year [52][53] Question: Strength of Rev PAR index and loyalty bookings - Management discussed ongoing investments in technology and marketing to enhance loyalty program effectiveness [60][61] Question: Labor costs and staffing challenges - Management noted that labor costs are less of an issue for economy and midscale hotels, and efforts are being made to optimize operations [70][71] Question: Free cash flow generation outlook - Management expects to convert approximately 55% of adjusted EBITDA to free cash flow for 2021 [77] Question: Development pipeline performance - Management reported strong growth in both domestic and international pipelines, with a focus on conversions [86][87]