Wyndham Hotels & Resorts, Inc.

Welcome everyone to the Wyndham Hotels and Resorts first quarter 2025 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 one on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star and two. 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. Thank you, Operator.

Good morning, and thank you for joining us. With me today are Jeff Pilotti, our CEO, and Michelle Allen, our CFO and Head of Strategy. 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 and investor presentation, which are available on our investor relations website at investor.windowmotels.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 and on our social media channels in the future. Accordingly, we encourage investors to monitor our website and our social media channels 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. Good morning, everyone, and thanks for joining us today. Despite an uncertain macro environment, we delivered a very solid start to the year. Adjusted EBITDA grew 9% on a comparable basis, and adjusted EPS increased 20%. We grew our global system by 4% and our pipeline by 5% to a record 2,143 hotels. We saw healthy increases in both our U.S. and our international royalty rates, We drove continued growth in our ancillary fee streams, and we returned nearly $110 million to our shareholders. Global rev par grew 2% in constant currency. International rev par grew in all regions except China. Latin America rev par grew by 25%, excluding Argentina's hyperinflation, with both strong ADR and higher fee par additions in Mexico and in the Caribbean. EMEA RevPar rose 6% with solid performance in Germany, Turkey, India, and Greece. And Southeast Asia and the Pacific Rim posted year-over-year RevPar growth of 8%. And in China, demand remained steady, but RevPar declined 8% year-over-year, reflecting continued pricing pressure. As you've all been tracking through STR, while U.S. RevPar started strong in January, Momentum softened in February and March as consumer sentiment weakened. Our results finished about three points below our expectations, growing 2% for the quarter or up 60 basis points when normalizing for the benefit from hurricanes and the Easter shift to Q2. Excluding these benefits, pricing power still remained steady, increasing 110 basis points for the quarter against a 50 basis point decline in demand. when normalizing for the timing of Easter and the lapping of last year's solar eclipse. April month-to-date rev par in the U.S. is down 3%, consistent with what we saw in March on a normalized basis. And while March and April results have trended below the expectations we had assumed in our original outlook, and Michelle will take you through our revised outlook in a moment, recent trends are now more encouraging, indicating positive momentum as we head into the busy summer travel months. Whatever demand scenario may transpire, our brands have always outperformed in periods of economic downturn relative to the overall industry. Following 9-11, Revpar for our select service hotels outperformed STR's upscale and above segments by 300 basis points. During the global financial crisis, by 500 basis points. And during COVID, by 2,500 basis points. Wyndham's track record of industry outperformance is not coincidental. It reflects the structural advantages of our select service model and the nature of the demand that we serve. With limited reliance on white-collar corporate and group travel, which tends to contract most during economic downturns, our business is anchored by a stable and resilient base of essential frontline blue-collar workers, a guest segment that continues to drive consistent demand even as broader corporate discretionary travel budgets tighten. This segment has shown resilience through prior cycles, and we expect it to do the same in any macroeconomic setup. Moreover, we are far less impacted by the current international inbound demand declines. Less than 3% of our bookings in the United States arrive from international inbounds, including less than 2% from Canada. Approximately 90% of our footprint is concentrated in drive-to markets, where leisure demand is less impacted by the cost and the complexity of air travel. Our brands are attractively priced relative to upscale full-service hotels, positioning Wyndham to capture trade-down demand from both leisure and business travelers seeking value. We outperform in times of economic distress because our model is different. During economic down cycles, we've continued to grow our system. Amid softer demand environments, hotel owners consistently turn to brands at scale that they know and that they trust, and brands that outperform their competitors, seeking broad distribution, a loyal customer base, operational support, and cost efficiencies. As independent and underperforming branded hotels face mounting pressure, Wyndham offers the tools, and the support needed to compete more effectively. And as investment in U.S. manufacturing accelerates, particularly in secondary markets, our existing system and pipeline of select service and extended stay hotels are located in regions where demand is growing. Whether it's in markets driven by the onshoring that new tariffs are creating, whether it's in markets that are beginning to benefit from large infrastructure projects that are finally beginning to break ground from the federal infrastructure bill where allocations are ramping, or whether it's from new private sector investments in large data center projects across the country, Wyndham's portfolio is well positioned to serve the everyday travel that these markets will benefit from in the decade ahead. Our continued momentum on the development front speaks volumes, reflecting not only the strength of our value proposition to owners, but also the confidence that they have in our ability to perform in any range of market conditions. This was a record first quarter for us in terms of room additions. We opened 15,000 rooms, 13% more than we did last year. and our development teams drove sequential net room growth across every region we operate in. We signed 6% more deals than a year ago, expanding our pipeline for the 19th consecutive quarter to a new all-time high of 254,000 rooms, representing an average fee par premium of over 30% versus our current domestic and international systems. Domestically, our mid-scale and above brands grew 4%, driven by conversions like the Wyndham Avanti Resort and Conference Center on International Drive in Orlando, and new construction openings like the La Quinta Hotel in La Habra in Orange County, California. New Echo Suites and Hawthorne Suites openings continued across Texas, Virginia, and Wyoming, reflecting growing developer interest in our extended stay new construction prototypes. Internationally, we grew net rooms by 7%. With continued strong interest in our brands across Europe, the Middle East, and Eurasia, our team grew the pipeline by nearly 40% and net rooms for the quarter by 5%, with new construction additions like the La Quinta Batumi Beach in Georgia's coastal hotspot. Latin America grew its pipeline by 9% and increased net rooms by 10%, with high-quality conversions like the Wyndham Altra Punta Cana Resort, and new construction hotels like the new Trip by Wyndham Guzman, located in the heart of Jalisco, the Mexican birthplace of tequila. In Southeast Asia and the Pacific Rim, net rooms grew by 14%, including the debut of our Wyndham Grand brand in Phnom Penh, Cambodia. And in China, our team doubled our direct franchising system openings, and grew net direct franchise rooms by 17% with both spectacular new conversions and beautiful new construction additions like the Days Inn by Wyndham, Shantou, Jinping, our 100th Days Inn in China. By contrast, our legacy master licensed franchisees in China grew at a much slower pace, up less than 2% year over year. excluding our China master licensees, global system growth would have been 30 basis points higher than our headline growth rate, underscoring our strategic focus on accelerating growth within our direct franchising platform internationally, where we continue to see stronger FEPAR and greater revenue potential in the quarters and the years ahead. As we prioritize our development growth in higher FEPAR geographies and higher chain scales, As we build scale in markets where we already have significant density, and as we expand our direct franchising and select regions previously heavily reliant on master licensee relationships, the hotels we're adding are entering the system with a stronger economics, contributing to meaningful royalty rate accretion, which is beginning to pay off. This quarter, for example, our royalty rate increased by 19 basis points domestically and by 15 basis points internationally. By continuing to remix our portfolio towards higher fee par hotels, we're elevating the long-term earnings power of our system. We also continue to see strong momentum in our ancillary fee growth this quarter, driven by our renewed co-branded credit card agreement, our growing partnership initiatives, and our ongoing technology innovations. New Barclays accounts rose 11% and spend volumes increased 7%. Our new debit card, which was launched this quarter, is attracting a much younger demographic into our ecosystem. And we recently announced a new partnership adding Carnival Cruise Lines to Wyndham Rewards, giving our loyalty members even more ways to explore, to earn, and to make the very most out of their vacations. Finally, We want to recognize our phenomenal team members around the world. For the third straight year and the fifth time overall, Wyndham was named one of the world's most ethical companies by Ethisphere. This honor reflects the care, the commitment, and the integrity that our teams bring to their work every day, and it's what makes Wyndham such a great place to work and a great company to partner with. In closing, while the current demand environment is uncertain, Our focus remains firmly on the long term. We've been here before, and each time we've stayed grounded in what we do best, growing our system, supporting our franchisees, and advancing the strategic initiatives that strengthen our business over time, which is exactly what we're focused on doing right now. Our value proposition is stronger than ever. It's powered by our world-class teams, a best-in-class technology stack, the industry's number one loyalty program, and a resilient, acid-light business model designed to perform through all phases of any economic cycle. We remain confident that our growth strategy will continue to deliver meaningful value for all of our stakeholders. And with that, I'll now turn the call over to Michelle. Michelle?