Wyndham Hotels & Resorts, Inc.

Good day and welcome to the Wyndham Hotels and Resorts fourth quarter and full year 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 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 zero. I would now like to turn the call over to Matt Capuzzi, Senior Vice President of Investor Relations. Please go ahead.

Matt Capuzzi Thank you, operator. Good morning, and thank you for joining us. With me today are Jeff Belotti, 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 in our earnings release, which is available on our investor relations website at investor.windomhotels.com. We are providing certain measures discussing future impact on a non-GAAP basis only, because without unreasonable efforts, 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 will turn the call over to Jeff.

Thanks, Matt, and thanks again, everyone, for joining us today. Before I talk about the fourth quarter, I'd like to thank our 9,000 global team members who helped us successfully navigate the tremendous challenges of 2020, along with all of our owners who continue to support and work with our teams in the field as we collectively look to a brighter 2021. The power of Wyndham's economy culture was never more on display than it was last year, and we are tremendously proud of how our teams and franchisees performed. Approximately 97% of our nearly 9,000 hotels remain open today. Our fourth quarter continued to demonstrate that our drive-to non-urban franchise business model can deliver in any environment, and we made sequential progress on multiple fronts. Our adjusted EBITDA and cash flows were both ahead of our expectations. Our brands in the U.S. continued to gain market share, and our room openings and new hotel contract signings continued to accelerate. We also completed the strategic termination plan we previewed with you on our second quarter call removing over 20,000 non-compliant brand-attracting rooms from our system, along with removing an unprofitable management guarantee deal signed back in 2012. Removing these rooms from our system will not only strengthen our long-term royalty rate and the quality and performance of our brands, it will open up development tracks in important markets where we now have teams in place to sell direct franchise agreements for full royalty-free deals. REVPAR and Q4 finished down 31% domestically, down 44% internationally, and down 35% globally on a constant currency basis. In China, fourth quarter REVPAR was down only 10% year over year, an improvement of 20 points from the third quarter. At down 31%, Q4's domestic REVPAR improved sequentially from Q3's down 32%, driven by occupancy, as average daily rate continued to hold steady. This trend continued in January with RevPAR improving seven points sequentially from down 31% in Q4 to down 24% for the first month of 2021. Cancellation rates have returned to prior year levels as overall confidence in the safety of drive-to leisure destinations has continued to improve while work from hotel bookings continue to increase and our average length of stay system-wide continues to grow. Demand from our essential everyday business travelers who travel for a living and who are not working from home has also continued to improve. Driving weekday bookings and weekday ADR, especially in our economy hotels, which ran average daily weekday rates, which were over 500 basis points higher year over year than their weekend rates, which are typically our higher ADR nights. Demand from construction crews and utility workers who comprise so much of our infrastructure segment improved 300 basis points from Q3, while demand from the trucking, rail, and manufacturing workers in our logistics segment remained stable. These traveling everyday workers, combined with the strength of leisure travel in our sales and marketing efforts, boosted market share for our economy and mid-scale brands by 210 and 520 basis points, respectively, in the fourth quarter. This performance was aided by targeted digital marketing through our new Wyndham Hotels and Resorts app that drove an 18% year-on-year increase in bookings for the quarter. In fact, all of our brands in the U.S. gained market share this year, with La Quinta, again, one of our strongest performing brands, gaining 570 basis points of REVPAR index for Q4 and 490 basis points of REVPAR index for the full year against its STR comp sets. You'll recall in the third quarter, we opened 20% more rooms domestically than we opened in the second. That momentum continued into our seasonally busiest fourth quarter as we opened over 70% more domestic rooms and over 30% more international rooms than we did in the third quarter. Conversion activity continued to accelerate and drove the majority of our over 14,000 room openings in the quarter. Second half conversion openings increased over 60% versus the first half of the year. Our most demanded conversion brands this year domestically have been Days Inn, Super 8, and Travelodge in the economy segment. and Baymont, Ramada, and Trademark in the mid-scale segment. Geographically in the United States, new openings were strongest in Texas, in Florida, and in North Carolina. And internationally, our openings were strongest in our direct franchising business across mainland China and Southeast Asia. Our teams were also very successful in again debuting multiple brands in multiple new overseas markets during Q4, including our first Lakita in New Zealand, our first Trademark in St. Martins, our first Super 8 in the United Arab Emirates, our first Ramada in Nepal, and our first Howard Johnson in Cambodia. Our overall domestic pipeline increased 120 basis points sequentially to 67,000 rooms and 20 basis points globally to 185,000 rooms. Notably, our conversion pipeline increased over 600 basis points globally, growing faster domestically than it did internationally. Here in the US, we signed 108 new hotel agreements in the quarter, nearly 75% higher than in Q3. And remarkably, our teams executed only one less deal in the fourth quarter of 2020 than they did in the fourth quarter of 2019. Internationally, we signed 91 new contracts, which was down from the 116 we executed in the fourth quarter of 2019, as restrictions continue to hamper many of our team's ability to travel cross-border in Europe Latin America, and parts of Southeast Asia. We opened 52 new construction hotels in Q4, including seven new La Quintas, and we signed 94 new construction deals in the fourth quarter, which compares to 97 new construction deals signed in the fourth quarter of last year. In the U.S., our new construction signings increased over 15% versus prior year, driven by our highly efficient microtel moda and La Quinta del Sol prototypes, combined with growing demand for our new Hawthorne Suites extended stay prototype, which is often dual branded with Lakita. With 256 hotels currently under construction and expected to open over the next two years, we've been encouraged to see continued demand for our select service new construction prototypes, which continue to be added to our pipeline. Despite the continued global travel restrictions, coupled with a continued lack of transaction volume and deal flow, we were very pleased with the sequential progress made throughout the year and our development team's ability to sign over 500 new direct hotel agreements, achieving over 90% of its full-year 2019 executions. Deletions in Q4 reflect the completion of the strategic termination plan we announced in May, coupled with an unforeseen deletion of 5,300 rooms triggered by the sale of certain hotels by Caesars Entertainment, with whom we have an important and longstanding win-and-rewards marketing relationship. The removal of these hotels from our distribution platforms, which were co-branded under our trademark collection, will have an immaterial impact on our royalty rate and adjusted EBITDA going forward, given the exclusive agreement reserved for certain strategic marketing partners of Wyndham Rewards. When excluding these unusual termination events in 2020, our global retention rate was 95%. Moving forward, we expect our retention rates to normalize, and we continue to target the 95% global retention rate achieved in 2019, with a long-term goal of moving our domestic retention rate from 95% to 96%. With 2020 now in the rear view mirror, our focus for 2021 is threefold. First, to return to positive net rooms growth. We've been investing in multiple strategies, tools, and technologies to increase not only our franchise sales footprint and capabilities, but also our win rates. Second, to carry on with the meaningful sales, operations, marketing, and digital investments we talked to you about on last quarter's call that are contributing so importantly to our guests' evolving travel habits and our franchisees' market share premiums and profitability. And third, to remain intensely focused on the guest experience while continuing to elevate the reputation and the quality of our brands, which globally experienced a 10% improvement in Net Promoter Scores in 2020. All three of these areas of focus contribute to our goal of strengthening Wyndham's franchisee value proposition, which ultimately drives net room growth both domestically and internationally. With 19 million hotel rooms tracked globally by STR, 5 million of those rooms are here in the U.S., and 14 million are overseas, where there are more unbranded hotels than there are branded hotels. And where we now have franchise sales teams in place, to sell directly to owners instead of through master licensees, which was historically how we would enter a new international market. With these teams now in place around the world, our opportunities are significant, as is our ability to continue to add our brands to new markets overseas as we sell the extraordinary value proposition a By Windham brand presents to hotel owners working their way back to pre-COVID profitability levels. According to STR research, brands drive a higher occupancy compared to non-branded hotels. Brands deliver more direct bookings through loyalty members who stay longer and spend more. And brands generate significant distribution and operating cost savings through lower procurement, technology, and labor costs. In 2019, occupancies for branded hotels in our core segments were 300 basis points higher than non-branded hotels, and costs were 500 basis points lower. And perhaps most importantly, branded hotels have experienced and will continue to experience lower failure rates and higher net asset values for their owners. Our teams are out in their markets around the world selling this powerful by Wyndham brand proposition every day to every owner we could talk to. It's a value proposition of the market share premiums that the most recognized economy and mid-scale brands in the industry can drive. A value proposition of how Wyndham rewards the industry's number one loyalty program when combined with our sales, marketing, and state-of-the-art distribution platform, can normally deliver 70% of an owner's room nights here in the U.S. at the lowest cost of distribution, combined with the significant cash savings our pricing power can deliver to their bottom lines. As our owners often tell our sales and operations support teams, they do business with us because they know us, they like us, and they trust us. While all of the brand benefits just mentioned are a critical part of our value proposition, so too is the messaging of the care, the support, and the guidance our teams can provide our small business owners on their road to recovery. As we look ahead, we have a lot to be proud of in terms of how we've supported and will continue to support our franchisees, along with what we've achieved corporately as a relatively new team. Our inclusive economy culture built on personal accountability, on caring and social responsibility has continued to shine. For the third consecutive year, we've received a perfect score on the Human Rights Campaign's 2021 Corporate Equality Index, measuring LGBTQ workplace equality. And for the second consecutive year, we were recognized with an A minus rating by the Carbon Disclosure Project for our team's actions to mitigate climate risk and manage our environment, something that we, along with our global franchisees and ownership base, will continue to remain focused on in 2021. We are highly optimistic about what lies ahead. We're encouraged that the vaccines are working, and we believe that they will help to deliver a multi-year resurgence in leisure travel unlike any other in our industry's history, providing an opportunity to grow our brands globally like never before. And we believe Wyndham Hotels and Resorts is uniquely positioned to continue to drive superior results for our owners and significant value for our shareholders. And with that, I'll now turn the call over to Michelle. Michelle?