Wyndham Hotels & Resorts, Inc.

Welcome to the Wyndham Hotels and Resorts first quarter 2020 earnings conference call. At this time, all participants have been placed in a listen-only mode, and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press the star and 1 on your touch-tone phone. If at any point your question has been answered, you may remove yourself from the queue by pressing the pound key. Lastly, if you should require operator assistance, please press star and zero. I would now like to turn the call over to Matt Capuzzi, Senior Vice President of Investor Relations.

Thanks, Hopper. Good morning, and thank you for joining us. With me today are Jeff Bilotti, our CEO, and Michelle Allen, our CFO. Before we get started, I want to remind you that our remarks today will contain forward-looking statements. These statements are subject to risk factors that may cause our actual results to differ materially from those expressed or implied. These risk factors are discussed in detail in our most recent annual report on Form 10-K, filed with the Securities and Exchange Commission, and any subsequent reports filed with the SEC. We will also be referring to a number of non-GAAP measures. Corresponding gap measures and a reconciliation of non-gap measures to gap metrics are provided in our earnings release, which is available on our investor relations website at investor.windomhotels.com. In addition, last evening, we posted an investor presentation containing supplemental information on our investor relations website. We may continue to provide supplemental information on our website in the future. With that, I'll turn the call over to Jeff.

Good morning and thanks everyone for joining us. As you'd expect, our comments today will be focused on our response to the pandemic and its impact on our business. It's clear that the near-term outlook for the economy is dependent on many factors, including the duration of government stay-at-home restrictions around the world. That said, we'll make every effort to address the issues that we know are important to you. Our highest priority throughout the COVID-19 outbreak has remained the health and safety of our guests, owners, and team members. to whom we are providing continuous support and assistance. And we hope that everyone listening on this call today is healthy and remain so during this difficult time. First, we want to reiterate that our franchise, leisure transient, fee-for-service business model is highly resilient during economic turmoil. Over 90% of our hotels here in the United States remain open and operating, and we have an unwavering confidence in our ability to weather this crisis. This confidence is reflected in our Board of Directors' decision which we announced yesterday to maintain a quarterly dividend now at $0.08 per share with a goal of raising the dividend in the upcoming quarters as visibility improves and travel demand continues to recover. We have made difficult and measured decisions to adjust our cost base to this new reality to preserve liquidity and to support our franchisees. Altogether, our actions since the start of this crisis have resulted in the identification of approximately $255 million in cash savings that will help mitigate revenue declines and provide us with the funds to continue to offer support to our franchisees. The actions affecting our team members were especially difficult decisions. To support them during this challenging time, we have provided benefits and partnered with several organizations to give displaced team members access to job opportunities across various industries that are now rapidly expanding their workforces, such as retail, grocery, healthcare, and senior living. Our team members' passion for hospitality makes them ideal candidates, and we're extremely grateful to have been able to partner with so many leading companies. To further assist team members, we have increased and expanded our fundraising efforts for the Wyndham Relief Fund, which was developed many years ago to support team members facing unforeseen financial hardships. A great number of people, many of whom are experiencing their own challenges from this crisis, have stepped up to support their colleagues, a strong testament to our values-driven culture. Our thousands of franchisees are also very much top of mind. This is an incredibly challenging time for them and their long-term success is critically important to us. We've taken proactive steps to help them preserve cash during this period. We've suspended certain fees and we've provided payment relief by deferring receivables and suspending interest charges and late fees. And we've deferred property improvement plans and certain non-essential brand standards requiring cash outlays. In addition, We're dropshipping difficult to procure emergency supplies grounded in guidance from the CDC for all of our U.S. hotels, employees and guests. And we have partnered with industry associations to advocate for increased government relief. Through constant communications and webinars with leading subject matter experts, we have guided our franchisees through the relief provided by the CARES Act for which the majority of our owners qualify. While Wyndham is not applying for any federal loan assistance, industry estimates suggest that more than 95% of our franchisees have applied for a PPP and or an EIDL loan, that nearly 80% were approved for one or both. As a reminder, the vast majority of our franchisees are financed by local and regional banks, of which nearly 90% are already providing forbearance or other forms of debt relief, according to the American Hotel and Lodging Association. and a large portion of our franchisees are SBA loan borrowers and are benefiting from the six months of debt relief the SBA is providing. Furthermore, with over 90% of the hotels in our system in the select service space, these hotels are less labor intensive and typically operate at higher margins than full-service hotels. They generally average fewer than a dozen full-time employees and staff levels are highly scalable to demand. We believe that the majority of our hotels can support debt service at occupancy levels of approximately 30% before receiving any governmental assistance, which lowers this 30% break-even considerably. We could not be prouder of our franchisees and how they have risen to the occasion. So many have volunteered free stays for traveling doctors, nurses, and other first responders, and others are offering their unused kitchens to help feed those who need meals. We've been moved by many of our loyal guests who are also supporting recovery efforts around the world. It was last month that we launched Wyndham's Everyday Heroes Initiative, which provides essential workers like truck drivers, warehouse workers, like grocery associates, and of course, healthcare workers with complimentary upgraded gold status through our Wyndham Rewards Program. Our brands, which are concentrated in the select service chain scale segments, have been outperforming the higher-end full-service hotels. Nearly 90% of our domestic properties are positioned along highways and suburban, small metro locations, which have fared better than those in downtown metro markets. Our customer profile in the U.S. is about 70% leisure and almost 90% drive-to, making us less reliant on business days and air travel. While the impact of COVID-19 continues to rapidly evolve, and the ultimate duration remains highly uncertain, as this pandemic abates here in the U.S., Our franchisees should be among the first to benefit, positioning us well for a quicker recovery. As it relates to net rooms growth, we finished the quarter with 828,000 rooms, a 2% increase over the prior year. The pandemic has inhibited our ability to open rooms both internationally and domestically. Room openings in the quarter declined from approximately 12,000 last year to 6,000 this year as franchisees have been focused on the crisis, and our development teams and opening teams have had to curtail travel. New construction projects are being completed, but some owners are waiting to open until travel demand begins to recover. We expect that new construction starts will slow over the next 12 to 24 months, as financing is expected to be constrained until there are signs of recovery. Our global development pipeline ended the quarter with 189,000 rooms, an increase of over 8,000 rooms, or 4% year over year. Our new construction pipeline grew by 3%, and our conversion pipeline increased 8%. Our pipeline in the US is now 52% conversion and 48% new construction. While we still believe we could continue to grow our new construction system with low cost and highly efficient prototypes in our select service brands, we believe that this growth will continue at a slower pace than it has in recent years. Converting independent hotels to our brands has always been an important part of Wyndham's consistent rooms growth through both up and down cycles. And as this industry recovers from COVID-19, we believe conversions will become an even more important growth vehicle for us. With over 15,000 independent economy and mid-scale hotels in the United States, we have restructured our franchise sales and development teams to increase our conversion coverage by approximately three times, redeploying new construction salespeople to convert independent economy and mid-scale franchisees to our brands, brands that are designed to drive higher market share through our larger loyalty and marketing programs. In addition to the increased support our teams can provide franchisees navigating through the post-COVID-19 recovery, our brands can help increase franchisee profitability by driving lower sourcing, technology, distribution, and OTA commission costs given our size and scale as the world's largest hotel franchise company. Our brands such as Days Inn, Super 8, and La Quinta generate some of the highest donated brand awareness in the industry. and provide significant value to our franchisees, especially during difficult times. Like never before, travelers today and going forward will be looking for brands that they can trust, not only for quality, but also for cleanliness and for safety. Our field teams are focused on helping to ensure that our franchisees are as prepared as ever, ready to confidently welcome guests back to their hotels. We are working to implement enhanced, rigorous cleaning protocols based on guidelines and safety information provided by the CDC and using EPA-registered disinfectants provided by Ecolab. In leveraging our scale and relationship with world-class distributors, we're providing our franchisees what they most need and yet can't individually source themselves, washable cloth masks for team members, as well as hospital-grade hand sanitizer and disinfectant wipes for our guests at check-in. We're providing new health and safety training to our frontline team members. We're making health and safety training available to our franchisees so they can address guest concerns. And we're mandating new health and safety operating standards. At the same time, we're identifying offsets to the cost of these new standards to help our franchisees drive profitability. And we're also updating additional existing brand standards to address social distancing and other protective measures building on our established processes and procedures to provide a clean and a safe stay. We are extremely proud of how the entire Wyndham family has responded to this crisis. We remain confident in the strength and the engagement of our team and our franchisees and property owners whom they support. While these are extraordinarily difficult times, we are certain that our Acid Light Select Service franchise business model is optimally positioned for continued long-term growth. Travel will inevitably rebound, and when it does, Wyndham will be there ready to welcome the everyday traveler to our approximately 9,300 hotels around the world. With that, I'll turn the call over to Michelle.