Wyndham Hotels & Resorts, Inc.

Welcome to the Wyndham Hotels and Resorts first quarter 2021 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.

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'll 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, filings 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, everyone, for joining us today. Our select service franchise business model delivered a strong start to 2021, with domestic REVPAR of down 25% to 2019, tracking ahead of what we estimated internally for the first quarter. And with consumer demand continuing to increase, our REVPAR has also improved significantly throughout the month of April. Month to date, our domestic REVPAR is down only 7% to 2019, with economy occupancy in REVPAR now running ahead of 2019 levels. Across all brands, we're seeing occupancies in the 70s in Florida, Arizona, and Utah, in the 60s in almost a dozen other states, including California, Texas, and Georgia. And in total, 75% of our domestic system are in states that are at or above 50% occupancy month to date. We're also seeing steady improvements internationally, as Michelle will cover later, most notably in China, where spending on travel is once again back to near pre-COVID levels. Throughout the quarter, we were highly encouraged to see cancellation rates normalize. Our average booking windows lengthened, and March website booking surpassed 2019 booking levels. Consumer confidence is back. Hotels are selling out again, and our busy summer season is upon us, a period over the next six months where the U.S. Travel Association is reporting that nearly nine out of every 10 Americans surveyed are planning to take a trip. Adjusted EBITDA for the quarter was $97 million, down 11% to 2020, and down only 14% to 2019. Free cash flow generation was equally strong with adjusted EBITDA converting at 60%. Our operations team opened 7,600 rooms, which was 23% higher than what we opened last year in the first quarter. Conversions were strong, accounting for 70% of our total openings in the quarter. And despite continued travel restrictions and buy-sell transaction volumes near historic lows due to ongoing lender forbearance and government stimulus, our franchise sales team signed 13,000 new rooms in the quarter, which was 87% of what was signed in the first quarter of 2019. Our global pipeline grew sequentially for the third consecutive quarter to 187,000 rooms. Room terminations were significantly below prior year and more importantly, 34% lower than what they were in the first quarter of 2019. foreclosures remained at around one-half of 1% of our domestic system. And we successfully entered into agreements with servicers for 26 of the 31 domestic hotels in foreclosure at the end of the quarter, as our net room growth for the full year tracked on pace with expectations. Owners in the select service segments of this industry are recognizing the power of a brand. According to SDR 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. In 2020, STR highlights that economy-branded hotels outperformed independent hotels by 1300 basis points, while mid-scale branded hotels outperformed independent hotels by 500 basis points. And so our teams are finding that prospective new franchisees are looking for immediately recognizable brands like ours in the economy and mid-scale space Brands that can provide strong central system contribution at a lower distribution cost. Over the past several years, and no more so than in 2020, we've tailored our brand's offerings to fit guests' evolving needs, which when combined with our powerful sales, marketing, loyalty, and distribution platform, helped our franchisees gain market share versus their STR comp sets of 350 basis points in 2020, followed by another 400 basis points this quarter. A few examples of recent independent conversion activity this quarter include the award-winning and LEED-certified Vienna Hotel and Spa by Trademark, located on Long Island, minutes away from Bethpage Golf Course and Jones Beach. In the heart of the European Union, the Hotel Avenue Louise Brussels became our 50th European conversion to the Trademark brand. And in the Caribbean, we converted the award-winning Canuca Aqua Resort in Curacao, along with the Turtle Island Beach Resort in Belize, both to trademark collection hotels by Wyndham. On the Wyndham conversion front, in the newest boomtown on Colorado's Front Range and in Morgantown, West Virginia's epicenter of history, we converted the Origin Westminster Hotel and the Hotel Morgantown, two highly rated lifestyle hotels, to our growing upscale Wyndham brand as part of a nine-hotel package deal with a thrash group of Mississippi, who have another four hotels to convert to the Wyndham brand in Austin, Tupelo, Mobile, and Kansas City later this year and next. And internationally, we converted the beautiful five-star hotel in the heart of downtown Xinjiang, Henan Province, China, to a full-service Wyndham. In addition to our team's ability to convert 52 hotels to Wyndham brands in the quarter, we saw 17 hotels under construction in the fourth quarter progress to opening, including our fifth new construction microtel to open in China, Tianjin, which was also the first of seven new-build Microtel hotels our China team expects to open this year, bringing our Microtel by Wyndham brand to 11 direct franchise hotels in total in a country where we introduced the brand only two short years ago. We also opened the very first new construction motor prototype in Canada, the Microtel Inn & Suites Quebec, across from the tourist center on scenic Lake Méjantique. Developer interest and demand for our new-build microtel mode of prototypes is thriving. And our franchise sales team's ability to penetrate high-barrier markets like Phoenix, Newark, Kansas City, Missouri, and Raleigh, North Carolina, which are just four of the over 100 microtels now under development in our pipeline, stems from microtel's highly efficient design, which requires less land to construct and where 70% of the build-out is rentable square footage versus about 60% for its peers. Microtel has become one of our most popular new construction prototypes to sell throughout this pandemic to developers who believe that now is the time to be building at a significantly lower cost per key for a brand that drove a full year 2019 RevPAR index of over 115%. On an overall basis, our development pipeline grew 120 basis points sequentially. We signed 112 new hotel agreements in the quarter, representing 90% of 2019 signings. The domestic pipeline improved 70 basis points, reflecting both conversion and new construction growth. And internationally, the pipeline increased 150 basis points sequentially, primarily reflecting continued interest in new construction overseas. Our China pipeline, at over 62,000 rooms, is almost entirely direct franchised, and it now sits with 20% more rooms in it than it did a year ago. Our Shanghai-based development team's ability to execute and open nine of the 18 available direct franchise brands that we've so far selectively decided to sell in China has shifted our concentration from a primarily all-master licensed country to over one-third of the China room mix now being direct franchise agreements where we are receiving 100% of the royalty fees. Moreover, our China team's ability to open 40 full-service five-star Wyndham and Wyndham Grand Hotels in key capital cities and provinces is a strong testament to Wyndham's growing brand recognition and franchise sales efforts as over 1,400 China hotels are now sold under our By Wyndham umbrella branding. Our entire organization remains focused on doing everything we possibly can to help restore owner profitability to pre-COVID levels. Earlier this month, based on extensive feedback from our franchise advisory councils, our owners, and our guests, We expanded our industry leading relief measures by reducing breakfast brand requirements for our economy hotels. These changes are designed to help franchisees lower operational costs while maintaining guest satisfaction. And we believe that they're the most significant breakfast relief measures taken by a major hotel company to date. The overall feedback and the engagement from our owner community since the announcement has been positive. we continue to advance our ESG efforts. And just yesterday, we published our 2021 ESG report, which is now posted on our corporate and investor-relation websites. This report highlights our commitment to operating our business in a way that is socially, ethically, and environmentally responsible. The report also includes enhanced disclosures around data privacy, cybersecurity, water conservation, and biodiversity. And it's based on the Sustainable Accounting Board standard for hotels and lodging, and the Task Force on Climate-Related Financial Disclosures. The report also features some of the very important work our teams are doing in response to COVID-19, ensuring the health and safety of our guests and team members and providing continued support to our franchisees while helping them become certified in our Wyndham Green program. Our quality scores as ranked by ISS are now two out of 10 on governance, two out of 10 on environment, and a best in class one out of 10 on social. We've intensified our diversity, equity, and inclusion efforts as we cultivate a workplace that supports the open dialogue that makes Wyndham Hotels and Resorts such a great place to work. We've earned a perfect 100% score on the Human Rights Campaign's LGBTQ Equality Index for three consecutive years, and we've achieved an A- rating on the Carbon Disclosure CDP Report for the second year in a row. We are thrilled with the recent upturned demand with what our teams around the world have achieved, and with how we currently see the busy summer season ahead shaping up. And with that, I'll turn the call over to Michelle. Michelle?