Dive Brief:
- Wyndham Hotels & Resorts saw U.S. RevPAR decline 5% year over year in the first quarter of 2024, according to an earnings report published Wednesday. The domestic decline was offset by 14% year-over-year RevPAR growth internationally, bringing the company’s global RevPAR growth in the quarter to 1%.
- Systemwide, Wyndham grew its development pipeline to a record-high 243,000 hotels in Q1. The company’s U.S. development pipeline grew 5% year over year in the quarter.
- The pipeline growth was bolstered by increased interest from hotel owners, particularly after Choice Hotels International ended its pursuit to acquire Wyndham in March, President and CEO Geoff Ballotti noted during a Thursday earnings call with analysts. Wyndham expects to build on its development momentum in coming quarters, thanks in part to its recent strategic partnership with upscale extended stay brand WaterWalk.
Dive Insight:
Wyndham’s decline in domestic RevPAR in Q1 reflected “industry-wide softness,” the company said in a Wednesday statement. Wyndham peer Hilton similarly posted RevPAR “in the low end of [its] expected range,” albeit up 2% year on year in the quarter.
Despite a dip early in the year, Ballotti said that RevPAR improved 240 basis points from February to March and accelerated into April, benefitting from weekend demand from the total solar eclipse on April 8. He added that May revenue on the books is pacing 7% higher than the same month last year.
“Despite a challenging RevPAR environment here in the United States, we're pleased to report another strong quarter of progress on our executions, openings, retention and net room growth around the world,” Ballotti said during the call.
In Q1, Wyndham opened more than 13,000 rooms, representing a year-over-year increase of 27%. The hotel company also awarded 171 development contracts in the quarter, 8% more than the same period last year. And in its 15th consecutive quarter of sequential pipeline growth, Wyndham’s development pipeline reached an all-time high of 243,000 hotels.
Certainty from developers bolstered that pipeline growth after Choice Hotels ended its monthslong pursuit to acquire Wyndham in mid-March, Ballotti noted during the call.
“Owners who were uncertain [about] committing to deals with us, those who did not want to wind up in the Choice system, have agreed to sign,” Ballotti said. “We're really positive with the tenor of conversations that are going out there with our franchise development teams, and any uncertainty that was out there in terms of doing business with us has certainly gone away.”
Ballotti said there’s no better example of dissipating uncertainty than the WaterWalk deal Wyndham made earlier this month. Through a strategic partnership, upscale extended stay hotel brand WaterWalk will join Wyndham’s portfolio. So far, the deal has added 11 hotels, or some 1,500 rooms, to Wyndham’s pipeline under the newly created brand WaterWalk Extended Stay by Wyndham.
Ballotti sees the brand, which offers both new construction and conversion options, as a “great upscale complement to our economy and midscale extended stay product,” adding later in the call that Wyndham is actively pursuing expansion into higher chain scales.
As of Q1, approximately 69% of Wyndham’s pipeline is in midscale and higher segments, according to the company’s earnings report. Nearly 80% of its pipeline is new construction projects.
Wyndham’s leading economy segment competitor, Choice Hotels, is also making a concerted push in upscale. Ballotti said that Wyndham “will always be looking to lead in the economy segment.”
The “unsuccessful hostile takeover attempt” by Choice Hotels did contribute to a significant decline in net income for Wyndham in Q1. In the quarter, Wyndham saw a 76% year-over-year decline in net income, which the company attributed to “transaction-related expenses” resulting from the failed merger, as well as an “impairment charge primarily related to development advance notes and higher interest expense.”
