Skift Take
Wyndham said its RevPAR (that’s hotel-speak for “how much money we make per room”) might be flat this year, but its EBITDA (that’s finance-speak for “profits, kinda”) was still looking good. The hotel franchisor partly chalked that up to an improved tech game that has helped it boost margins.
Wyndham Hotels & Resorts said Thursday that its recent technology investments have helped keep profits flowing to the bottom line, even as traveler demand for the hotel group’s core economy segment moderates.
“We’re bringing technology typically offered in luxury and upscale segments to select-service hotels,” said Geoff Ballotti, president and CEO.
Digital upgrades to deliver results
Since 2018, Wyndham has done a $275 million tech overhaul, attempting to improve its digital game â especially in the select-service hotel space.
Three weeks ago, it began rolling out its new “Wyndham Connect” guest engagement platform. Ballotti highlighted that more than 2,000 North American hotels have already adopted the system, which leverages “one of the most substantial AI-driven, large language models in the industry.”
Key features include:
- “Smart Mobile” Check-in: Streamlines the arrival process and helps prevent costly chargebacks.
- Messaging guests with generative AI: Allows hotels to communicate with guests before, during, and after their stays.
- New upselling capabilities: Enables properties to offer room upgrades, early check-ins, and snacks to be available on arrival, thanks to a long-time integration with Oracle’s Nor1 tech. “Our hotels are seeing upwards of $1,400 monthly in monetization opportunities,” Ballotti said.
Earnings strength despite rate moderation
The company’s executives claimed the tech improvements are benefiting franchisees.
“Our business is getting more efficient, particularly on the technology side,” said Michelle Allen, Wyndham’s chief financial officer. “We’ve integrated our commercial organization, we’re leveraging third-party partners, and we’re seeing benefits in G&A [general and administrative expense] line items.”
On the one hand, Wyndham revised its full-year 2024 global revenue per available room growth outlook to “approximately flat” from the previous guidance of 2-3% growth.
Despite this reduction, Wyndham maintained its adjusted EBITDA guidance range of $690 million to $700 million. “The EBITDA guide was unchanged despite the RevPAR guidance being lowered by 250 basis points at the midpoint,” wrote analysts Patrick Scholes and Gregory Miller in a report for Truist Securities. “This may be the only time we have seen a guidance move like this.”
Wyndham execs said the tech gains helped enable its EBITDA guidance move.
Key second-quarter details
- Adjusted EBITDA increased 13% to $178 million.
- The company reported strong development activity, with domestic franchise sales teams signing 33% more development deals. The company’s global development pipeline grew for the 16th consecutive quarter, reaching a record 245,000 rooms.
- Global revenue per available room (RevPAR) increased 2% in constant currency compared to the prior year, driven by 7% growth internationally, while U.S. RevPAR remained flat.
- The company continued to expand its hotel portfolio, growing its system size by 4% year-over-year. Wyndham opened over 18,000 rooms in the quarter. International room growth was 8%, outpacing U.S. growth of 1%.
- The company’s development pipeline reached a record 245,000 rooms, up 7% from the previous year.
- Over half of the pipeline was outside the U.S. It cited continued success in attracting high-value deals to the system. “In China, we’re growing our pipeline to nearly 400 hotels, a 9% increase over prior year and importantly, representing a pipeline with nearly double the fee part of our current China portfolio,” Ballotti said.
- Wyndham’s loyalty program, Wyndham Rewards, had about 110 million enrolled members as of June 30. That was up 4.7% from the start of the year.
Wyndham’s top brands
Company executives noted that some of their brands were doing exceptionally well at winning market share.
- Days Inn: Showing strong conversion potential and over-indexing on market share.
- Hawthorn Suites: Gaining traction in the extended stay segment.
- Microtel: Attracting both new build and conversion opportunities.
As Michelle Allen, Wyndham’s CFO, put it: “The fact that we’re seeing incremental demand for our brands, especially in tough markets, is something we view very positively.”
Interest in extended stays
The company’s extended stay gambit seems to be paying off.
The first Echo Suites by Wyndham hotel opened in Spartanburg, South Carolina, earlier this month. The brand has become the fastest-growing brand in Wyndham’s portfolio, with over 33,000 rooms in the pipeline.
Ballotti noted, “Most of those in attendance were developers who have either broken ground or soon will be breaking ground. There are developers who have built hundreds of competitive economy, midscale, upper-midscale extended stay products, and they were absolutely thrilled with the finished product.”
Across its full portfolio, Wyndham expects some occupancy improvement in the U.S. market for the second half of the year, driven by increased infrastructure spending and a gradual return to year-over-year growth.
See Geoff Ballotti, President and CEO of Wyndham Hotels & Resorts, speak at the Skift Global Forum in September in New York City.
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