Wyndham Hotels & Resorts(WH) - 2020 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company generated $296 million in revenue and $56 million in adjusted EBITDA for Q4 2020, bringing full-year revenues to $1.3 billion and adjusted EBITDA to $327 million [28] - Q4 revenues, excluding cost reimbursement revenues, decreased by $126 million, primarily due to a 35% decline in global RevPAR and a $50 million decline in license fees [29] - Adjusted EBITDA declined by $97 million in Q4, reflecting revenue changes partially offset by a 15% reduction in costs [29] - Full-year adjusted diluted earnings per share was $1.03, with a cash balance of $493 million at year-end, down $242 million from September 30 [35][36] Business Line Data and Key Metrics Changes - The select service portfolio of economy and mid-scale hotels in the U.S. saw RevPAR declines of 28%, with nearly two-thirds coming from occupancy [30] - Domestic RevPAR in Q4 finished down 31%, while international RevPAR was down 44%, showing an improvement from previous quarters [11][32] - The company opened over 14,000 rooms in Q4, with conversion activity driving the majority of openings [14] Market Data and Key Metrics Changes - In the U.S., new openings were strongest in Texas, Florida, and North Carolina, while internationally, openings were strongest in Mainland China and Southeast Asia [15] - The overall domestic pipeline increased to 67,000 rooms, while the global pipeline reached 185,000 rooms [16] - In China, RevPAR was down only 10% in Q4, with occupancy levels improving to 50% [32] Company Strategy and Development Direction - The company aims to return to positive net rooms growth, focusing on franchise sales and marketing investments to enhance guest experience and brand quality [21] - The strategic termination plan removed over 20,000 non-compliant brand-attracting rooms, strengthening long-term royalty rates and brand performance [10] - The company is optimistic about the resurgence of leisure travel and believes it is well-positioned to drive superior results for owners and significant value for shareholders [27] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery in leisure travel due to effective vaccine rollouts and improving market conditions [27] - The company expects net room growth of 1% to 2% in 2021, with retention rates normalizing back to the 95% range [39] - Management highlighted the importance of maintaining a strong balance sheet and liquidity to support franchisees during challenging times [36] Other Important Information - The company ended 2020 with over $1.2 billion in liquidity, including a $750 million undrawn revolving credit facility [36] - The Board of Directors authorized a 100% increase in the quarterly cash dividend to $0.16 per share [38] Q&A Session Summary Question: How to think about unit growth and free cash flow? - Management discussed the removal of non-compliant rooms and how it opens new development tracks for franchise sales, which will enhance cash generation and fee generation [49] Question: What is the expected breakout between conversions and new construction? - Management indicated that conversions made up about 60-65% of openings in 2020, with expectations for this percentage to increase [56] Question: What is the trajectory of G&A growth throughout the year? - Management expects G&A to be about $5 million favorable to 2019 levels per quarter, with a 15% reduction anticipated [63] Question: What brands performed best in terms of RevPAR? - La Quinta was highlighted as the best-performing brand, with significant market share gains, followed by strong performances from Hawthorn and Microtel [75] Question: What is the outlook for license fees in 2021? - License fees are projected to be $70 million, tied to contractual minimums, with expectations for improvement if sales exceed projections [81]