Wyndham Hotels & Resorts, Inc.

Welcome to the Wyndham Hotels and Resorts second quarter 2023 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 1 on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star 2. 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.

Thank you, Operator. Good morning, and thank you for joining us. With me today are Jeff Blatty, 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, 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, everyone, for joining us this morning for our second quarter earnings call. This quarter marked our fifth year as a public company since our spinoff from Wyndham Worldwide in 2018. Five years later, we're a significantly stronger company with a much more simplified business model. We've moved from a franchise and managed hotel company to a pure play franchise business, having sold our own hotels and exited the U.S. hotel management business along with all of our management guarantees and performance commitments. As the world's largest hotel franchise company, whose growth continues to accelerate, our teams have so much to be proud of. Over the past five years, we've launched, acquired, and integrated five new brands that bringing our portfolio to 24 brands globally in every segment of the industry from economy to luxury. With the industry's number one loyalty program as named by U.S. News and World Report just this week, Wyndham Rewards is now driving nearly one out of every two check-ins domestically for our franchisees. Our brands are marketed under the Buy Wyndham Umbrella marketing banner that is searched roughly 2 million times each and every day. We've expanded it to over 55 new countries, debuting our brands more than 100 times in countries where they've never been before, while expanding our global development pipeline by over 50% to 228,000 rooms and nearly 1,850 hotels. Despite the impact from COVID, we've driven gross unit additions at an average annual growth rate of over 7% over these past five years, and we've improved our franchisee retention rate from 93% to over 95% with the industry's leading retention rates in the economy segment. From an earnings standpoint, we've grown our adjusted EBITDA by over 70%, and we've improved our franchise margin from 65% to over 80%. We've proven ourselves as a company dedicated to the long-term success of our franchisees, team members, and shareholders, the latter of whom we've returned over $1.6 billion of capital to since listing on the NYSE or approximately 27% of our market cap at Spin. After eight strong quarters of consistent earnings growth coming out of COVID and a very strong first quarter of 2023, our second quarter was no exception. Globally, RevPAR grew 7% in constant currency. Net rooms increased 4%. Our development pipeline grew by 1% sequentially and by 10% the prior year. and adjusted EBITDA increased 8% on a comparable basis. We generated $74 million in free cash flow, and we returned another $139 million of capital to our shareholders. Demand growth and recovery overseas was especially strong. Occupancy improved 16% year over year, and REVPAR grew 34%. China is now at 99% of 2019 REVPAR levels driven by strong leisure bookings over the May Labor Day and Dragon Boat Festival holidays. U.S. REVPAR is now normalizing against the record comps we saw last year, yet growth versus pre-COVID levels has remained strong. We saw growth of 9% in April, moderate to 6% in May, and then rebound to 10% in June, and July month-to-date stands at 12%, a 200 basis point acceleration from June. Fundamentals remain strong, and our select service brands continue to outpace their full-service counterparts across the industry by 300 basis points in the second quarter. Recent economic data continues to build our confidence for future demand and booking trends. June's Consumer Confidence Index increased seven points, showing positive movements in both the present and future expectation components, while at the same time U.S. unemployment remains at its lowest levels since the 1960s. Our middle-class guests with average household incomes of over $90,000 Nearly 30% above the U.S. median have seen wage and savings growth of approximately 20% and nearly 30% respectively since 2019. And with their wage growth outpacing the rate of inflation since the start of 2019, they continue to allocate a higher share of their wallets to travel. July month-to-date Google search volume for affordable travel is running 8% ahead of last year. When combining these strong leisure travel trends with the double-digit increases versus 2019 that we continue to generate from the infrastructure accounts who drive over 20% of our franchisees' revenues, we remain bullish about our growth prospects in the quarters and years ahead. We grew our overall system for the 10th consecutive quarter by 1% sequentially and by 4% versus prior year. With strong conversion and solid new construction activity, we opened nearly 18,000 rooms in the quarter, which was 23% higher than last year and 10% higher than 2019. Year to date through June 30th, we've opened 198 hotels, opening more than one hotel each and every day. We improved our franchisee retention rate by another 20 basis points from where it stood at the same time last year, which when combined with the consistency of our strong openings performance, position us solidly on track to achieve our full year net room growth outlook of 2% to 4%. Here in the United States, we grew our system for the eighth sequential quarter, including another 100 basis points of sequential growth in the more revenue-intense mid-scale and above segments this quarter. We added over 6,400 rooms, including the Hawthorne Suites Houston in Kingwood near George Bush Intercontinental Airport and the La Quinta Manchester, Tennessee near the Jack Daniels Distillery, both new construction openings. Internationally, we opened 66 hotels, 14% more than last year, and we grew net rooms by over 9%. Our Latin America team grew net rooms by 2% sequentially and by 17% versus prior year, adding some fantastic new leisure and new business destinations, like the new construction trip by Wyndham in the heart of Brazil's capital city, Brasilia. our EMEA region drove over 1% of sequential and over 9% of year-over-year organic net room growth with quality second quarter conversions like our first Ramada Resort in Cyprus, our first trademark collection in Turkey at Istanbul Airport, and our first registry collection resort on the Aegean Sea in Greece. In Southeast Asia and the Pacific Rim, which increased their system by 7% sequentially and by 12% year-over-year, We opened six new hotels this quarter, including the Wyndham Grand Phu Quoc, a luxurious 1,400-room newly built conversion hotel on Vietnam's largest island in the Gulf of Thailand, which has seen exponential tourism growth in recent years. And in China, which experienced a 4% sequential and a 13% net room growth in our direct franchising system, we opened 10 new construction hotels. along with 30 conversion hotels, which was 19 more than last year, including the beautiful new Wyndham Garden Shenzhen, located in the Central Business District next to Huawei's world headquarters. We grew our development pipeline 1% sequentially and by 10% versus prior year to a record 228,000 rooms in nearly 1,850 hotels, marking Wyndham's 12th consecutive quarter of sequential pipeline growth. Our teams awarded over 175 contracts for approximately 24,000 room additions, 6% ahead of last year and 7% higher than 2019. Over 70% of our pipeline is in the higher revenue generating mid-scale, upper mid-scale, upscale, upper upscale, and luxury chain segments. Finally, on the Echo Suites extended stay front, over the past few weeks, we awarded another 60 new contracts to established and experienced developers, including what will be the brand's first hotels in Canada. Our Echo Suites by Wyndham brand has now a global pipeline of 265 hotels and approximately 33,000 rooms. Internationally, our teams had executed 21% more rooms in the second quarter than they did in 2019, with similar growth in both conversion and new construction hotel deals, led by our Latin America region and our China direct franchising business. For the ninth consecutive quarter, revenue from our general infrastructure-related business accounts increased double digits versus 2019, reflecting both higher ADRs as well as an increase in our capture rate as the earmarked spend from the Infrastructure and Chips Act has yet to be deployed into market in a meaningful way. As we prepare for the acceleration of infrastructure spending in the months and years ahead, We've expanded our sales teams by 25%. We've enhanced our digital capabilities to drive more leads, and we've invested in new technology to enable seamless bookings for these infrastructure workers. As the results we're seeing are promising, leads generated for our hotels are up 15% year over year, and the number of new accounts acquired are up nearly 20%. These investments are paving the way for significant revenue growth from this category over the next handful of years. In closing, Q2 is another strong quarter that saw continued improvement in global red part, executions, openings, retention, and net room growth both domestically and internationally. Of all the accomplishments that our team members have achieved this quarter and throughout each of the last 20 quarters since becoming a public company, there is no greater accomplishment than fostering a more diverse global community while living our core values of integrity, accountability, inclusivity, caring, and fun. We could now say that at mid-year, we have been named for 2023 as one of Newsweek Magazine's global most loved workplaces, one of Ethisphere's world's most ethical companies, and one of Diversity Inc.' 's top 50 companies for diversity. And none of this, none of this would be possible without the constant support and engagement of our franchisees and team members, an engagement level which has never been stronger in Wyndham Hotels and Resorts last five years as a public company. And with that, I'll turn the call over to our CFO, Michelle Allen. Michelle?