Wyndham Hotels & Resorts, Inc.

the Wyndham Hotels and Resorts 3rd Quarter 2020 Earnings Conference Call. At this time, all participants have been placed on 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 star and 1 on your touchtone 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 0. I would now like to turn the call over to Matt Capuzzi, Senior Vice President of Investor Relations.

Please go ahead. Thank you, Operator. Good morning, and thank you for joining us today. With me today are Jeff Pilati, 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 GAAP measures and a reconciliation of non-GAAP measures to GAAP metrics are provided on our earnings release, which is available on our investor relations website at investor.windomhotels.com. To the extent there are non-GAAP measures discussing future impact, we are unable to provide the comparable GAAP metric. 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. Accordingly, we encourage investors to monitor our website in addition to our press releases, filing submitted with the SEC, and any public conference calls or webcasts. With that, I'll turn the call over to Jeff.

Thanks, Matt, and thanks, everyone, for joining our third quarter call. In the face of continued industry uncertainty, Wyndham generated $101 million of adjusted EBITDA and $102 million of adjusted free cash flow during the third quarter due to the stability of our leisure-oriented drive-to franchise business. Over 99% of our domestic hotels remain open, and approximately 80% of our franchisees are now running at occupancy levels above 30%. We've already received payment on over 70% of the fee deferrals we provided to our franchisees for the months of March, April, and May, and we continue to see our overall cash collections tracking within 10% of prior year levels. Nevertheless, we know that some small business owners are struggling and may be forced to close without more government support, which is why we, along with the rest of our industry, are doing everything we possibly can to advocate at both the state and federal levels. Our brands can collectively gain more than 300 basis points of market share domestically during the quarter. This improvement was driven by rising demand and drive to leisure travel during the weekends, which improved 26 percentage points compared to the second quarter, combined with a robust return of our everyday business traveler during the weekdays, which increased 19 points compared to the second quarter. Approximately 70% of our bookings at our hotels are leisure oriented, with the other 30% coming from business travel. Our everyday business traveler is a steady and reliable segment of business travel that has been far less disrupted by the pandemic. As the backbone of America's workforce, our everyday business travelers have continued to travel and seek a safe and comfortable stay after a workday on the road. Two-thirds of our business bookings come from the infrastructure industries, including construction crews, utility workers, and engineers. While this travel demand declined 49 percent in the second quarter, we've experienced a strong rebound in the third quarter, with this business down only 24 percent, a 25-point improvement sequentially. The vast majority of the remaining one-third of business bookings at our hotels come from logistics industries, including manufacturing, trucking, rail, and warehouse workers. We've seen similar rebounds in this segment, with bookings improving from being down 40 percent in the second quarter to down 26% in the third quarter, a 14-point improvement sequentially. As a lodging leader for these everyday business travelers, we are not relying on air travel, international inbound or large convention-based corporate travel, which is one reason why our business is uniquely positioned to continue to outperform. La Quinta was a beneficiary of the improving trends in our business and leisure travel demand. It was once again our strongest performing brand, growing its REVPAR index against its direct competitive set by over 700 basis points. Globally, over 97% of our hotels are now open, and as Michelle will cover, Asia Pacific was our strongest performing region internationally, and China, where recovery is already a reality, our strongest performing market. Over 96% of our 1,400 hotels in China have reopened, and hotel occupancies have returned to near normal levels. Room openings, which declined 64% the prior year in the second quarter, improved to down 33% in the third quarter as we opened 21% more rooms domestically and 106% more rooms internationally in the third quarter than we did in the second quarter. Our domestic pipeline grew 3% sequentially to approximately 66,000 rooms. with a 6% increase in conversion rooms and a 1% increase in new construction rooms. Our international pipeline increased 2% sequentially to over 118,000 rooms, and it increased 12% to prior year. Globally, our pipeline grew 3% sequentially to approximately 185,000 rooms. Despite varying degrees of travel restrictions both domestically and overseas for our development teams, we were encouraged with their ability to execute 152 hotel agreements, over 30% more than they executed in the second quarter. In the United States, we signed 11% more hotel contracts than we signed in the third quarter of 2019. This double-digit year-over-year growth in domestic executions was driven by a 23% increase in conversion signings, slightly offset by an expected decline of 4% in new construction signings versus prior year. Nevertheless, we were encouraged to see developer demand for 24 new construction hotel executions, representing continued interest in our highly efficient MicroTelmoda and La Quinta del Sol prototypes, as well as for our new dual-branded La Quinta Hawthorne Suites extended stay prototypes. We were also encouraged to see six hotels complete construction and open, and another seven new construction hotels break ground in the third quarter, despite the crisis. None of these sequential revenue, adjusted EBITDA, or room opening improvements would have been possible without the hard work and dedication of our corporate team members who support our owners around the world and who are now all back to work full time, along with our frontline associates who have gone above and beyond to keep our guests both safe and satisfied. Throughout the pandemic, our overall guest satisfaction and net promoter scores continued to improve. And what continues to inspire and motivate our teams around the world is just how much has been accomplished throughout this unimaginable crisis with so many members of our organization, both domestically and internationally, working remotely. And it's been encouraging to see consumer confidence in feeling extremely safe while staying in our hotels double from April levels, according to the October Travel Intention Pulse Survey conducted by MMGY Global. Though it's been a tumultuous time for all of us in our industry, our teams continue to innovate with an eye towards the future, an eye towards maximizing the value we provide to our franchisees. We recently deployed three state-of-the-art initiatives aimed at increasing bookings at our hotels and increasing overall franchisee profitability. First, as part of our broader digital investment strategy, we recently launched a best-in-class customer data platform to better enable our teams to compile, to visualize, and to analyze data from multiple sources and deliver increasingly sophisticated and actionable guest insights. We can now better understand guest behavior and preferences and leverage that knowledge to keep them loyal to our brands, which increases direct bookings and lowers overall customer acquisition costs for our franchisees, thereby increasing their profitability. Investing in our team's understanding of our guests and how we can incentivize them to book direct enhances the return on the marketing dollars we spend. Second, to support our everyday business traveler, we launched a powerful business to business solution called Wyndham Direct. Business travelers can now simply book on any direct channel, including our new mobile app, using a Wyndham Direct ID number. All guest room and incidental charges are now processed through our new Wyndham Direct platform with one monthly bill and without the need for company credit cards. We've also automated the tracking and payment for these business customers, and in doing so, we're saving them and our franchisees time and money. This new technology is expected to continue to increase our bookings from both the infrastructure and logistic industries we service and position us well to capture an increased share of the eventual return of corporate transient business travelers. And third, we launched what we believe to be the fastest mobile app in the industry, providing a first-class user experience that travelers are demanding. Booking a room is now easier and faster than ever with Lightning Book's three-tap booking process, powered by geolocation that immediately displays up to three hotels within 15 miles of the guest, providing both our leisure and business road warriors the opportunity to book on the go. Touch and Face ID removed the friction of authentication and account management While in-stay features anticipate where guests are in the travel journey and allow for remote check-in and check-out directly from the app, which will be available to the majority of our properties in North America by the end of 2020. Since its launch in late summer, app bookings over September and October are running 4% above prior year as compared to 7% below prior year during July and August, an 11-point improvement in such a critical booking channel. An important element in driving increased direct bookings for our franchisees is our highly engaged 85 million Wyndham Rewards members. These members have made Wyndham Rewards the most rewarding program in the economy and mid-scale space. They seek redemption at our 9,000 hotels and tens of thousands of aspirational vacation opportunities at Wyndham Rewards affiliated club resorts, vacation rentals, and marketing partners. We're incredibly proud of our Wyndham Rewards loyalty program And just three weeks ago, the readers of USA Today named Wyndham Rewards the best hotel loyalty program in the industry, marking the third consecutive year that we have received the highest honor in the hotel loyalty program category above all peers. And this was also the second consecutive year that the readers of USA Today named Wyndham Rewards' co-branded credit card the best travel and hotel card in the industry. This year's rankings come on the heel of Wyndham Rewards' newly announced and updated credit card suite of new products, including the Wyndham Rewards business card, the first Wyndham credit card built for the small business owner staying at Wyndham Properties, who is also spending heavily on marketing, advertising and utility, expenses for which they can now earn a standout five points per dollar spent. And the program also provides an industry-leading eight points per dollar spent on gas purchases and Wyndham hotel stays. Despite all of the challenges our industry is facing, Our drive to leisure-focused franchise business has never been better positioned for growth. Our teams continue to innovate and deliver impressive results in the face of so many obstacles. We're deeply appreciative of their faith in our ability to emerge from this crisis as a stronger company as we strive to deliver continued support and value for our franchisees and hotel owners. And with that, I'll turn the call over to Michelle. Michelle?