Executive Summary / Key Takeaways

• Wyndham Hotels & Resorts (WH) leverages its asset-light franchising model and extensive portfolio of economy and mid-scale brands to deliver resilient financial performance and consistent shareholder returns, even amidst macroeconomic uncertainties.
• The company's strategic focus on FeePAR (fee-per-available-room) accretive development, particularly in extended stay and higher chain scales, is driving robust pipeline growth and expanding royalty rates, positioning it for enhanced long-term earnings.
• Wyndham is a leader in technological innovation within its segment, with its cloud-based tech stack and AI-driven platforms like Wyndham AI significantly improving operational efficiency, direct bookings, and ancillary revenue generation for franchisees.
• Ancillary fee streams, notably from the renewed co-branded credit card program and the new Wyndham Rewards Insider subscription, are accelerating and provide a durable, high-margin growth layer insulated from RevPAR fluctuations.
• Despite recent RevPAR softening, particularly in the U.S. economy segment, Wyndham's business model, supported by blue-collar and infrastructure-related demand, has historically outperformed during economic downturns, offering a compelling value proposition to both guests and franchisees.

The Resilient Franchise Engine: Powering Hospitality's Value Segment

Wyndham Hotels & Resorts stands as a global leader in hotel franchising, licensing its diverse portfolio of renowned lodging brands across approximately 100 countries. The company's core business model is asset-light, focusing on franchising to third-party hotel owners rather than direct ownership or extensive management. This strategic foundation, established after its 2018 spin-off, underpins its operational flexibility, lower capital intensity, and resilience across economic cycles. Wyndham’s overarching strategy centers on driving FeePAR accretion through targeted development, expanding direct franchising in key international markets, and leveraging cutting-edge technology to enhance franchisee profitability and guest experience.

The company's foundational strengths include its extensive brand diversity, particularly in the value-oriented economy and mid-scale segments, and its award-winning Wyndham Rewards loyalty program. These elements foster a stable base of essential frontline blue-collar workers and leisure travelers, a segment historically less impacted by discretionary corporate travel downturns. Broad industry trends, such as the multi-year tailwind from the $1.2 trillion infrastructure bill and the surge in data center construction, are creating significant demand in Wyndham's core markets, with the infrastructure bill alone projected to drive over $3 billion in revenue to its hotels. The burgeoning $500 billion subscription economy, projected to grow to over $2 trillion, also presents a substantial opportunity for new revenue streams.

A History Forged in Franchising and Innovation

Wyndham's journey since its 2017 incorporation and 2018 spin-off has been marked by a deliberate evolution towards its current asset-light, franchise-centric model. Early strategic moves included the establishment of a share repurchase program in May 2018 and a substantial investment of over $300 million in building an industry-leading, cloud-based technology stack. This foundational technology investment has been critical in shaping its current competitive advantages. A pivotal strategic shift occurred in 2019 with the reacquisition of direct franchising rights for the Days Inn brand in China, signaling a clear pivot away from master license agreements towards a more profitable direct franchising model internationally.

This strategic focus on direct franchising has yielded significant results, with the direct franchising business in China growing at a 12% compounded annual growth rate since 2020. The company's commitment to shareholder returns has been consistent, with the Board regularly increasing the capacity of its share repurchase program. By 2023, Wyndham's operational integrity was recognized with its fifth overall designation as one of the World's Most Ethical Companies by Ethisphere. The company also proactively implemented restructuring plans in 2024 and 2025 to enhance organizational efficiency and streamline operations, particularly within its marketing, reservation, and loyalty functions, with the 2025 plan expected to generate approximately $15 million in annualized savings for reinvestment.

Technological Edge: Driving Efficiency and Ancillary Revenue

Wyndham's technological differentiation is a cornerstone of its investment thesis, providing a significant competitive moat. The company has invested heavily in a cloud-based technology stack, partnering with best-in-class providers like Oracle (ORCL), Amazon (AMZN), Adobe (ADBE), Sabre (SABR), and Canary Technologies. This robust infrastructure enables faster innovation at a lower cost and is specifically optimized for AI capabilities.

The tangible benefits of this technology are evident across its operations:

• Wyndham Connect and Wyndham AI: These platforms are transforming guest engagement and hotel operations. Wyndham AI, leveraging large language models and Agentic AI voice assistance, employs over 230 AI agents with encyclopedic knowledge of its 8,300 hotels. These agents handle hundreds of thousands of customer interactions, delivering faster service, higher booking conversion, and a 25% reduction in average handle time. For hotels fully leveraging Wyndham AI, this has contributed to nearly 300 basis points of improvement in direct contribution. The system also automates upsell opportunities like early check-ins, late check-outs, and in-room amenity upgrades, accelerating ancillary revenues for thousands of hotel owners.
• Wyndham Gateway: This new centralized Wi-Fi log-in system creates additional ancillary revenue opportunities and simplifies loyalty program enrollment.
• Wyndham Rewards Insider: Launched in October 2025, this travel rewards annual subscription program, a first of its kind among major hotel loyalty programs, offers unmatched value to its 121 million Wyndham Rewards members for an annual subscription of $95. It provides savings of up to 30%, annual Gold status, exclusive concierge services, and bonus earning opportunities, enhancing member engagement and share of wallet without impacting franchisee costs.
• Co-branded Credit and Debit Cards: The renewed long-term agreement with Barclays (BCS) for its co-branded credit card and the launch of a new co-branded debit card with Galileo Financial Technologies are significant drivers of ancillary revenue. The debit card, the first in the U.S. hospitality sector, taps into the $4.5 trillion debit card spending market, attracting a younger demographic and providing alternative ways to earn loyalty points.

These technological advancements directly contribute to Wyndham's competitive moat by enhancing operational efficiency for franchisees, driving direct bookings to reduce OTA dependency, and creating new, high-margin ancillary revenue streams. The company's ability to innovate faster and at a lower cost than many peers, as noted by its partners, positions it strongly for long-term growth and profitability.

Strategic Development and Operational Excellence

Wyndham's operational strategy is deeply intertwined with its franchising model. The company's global development pipeline reached a record 257,000 rooms across nearly 2,200 hotels as of September 30, 2025, representing a 4% year-over-year increase. This growth is strategically concentrated, with approximately 70% of the pipeline in mid-scale and above segments and 17% in the extended stay segment, which is projected to grow nearly 30% from $21 billion in 2024 to $27 billion by 2028. Approximately 75% of the pipeline consists of new construction, with 36% already having broken ground.

The company's focus on FeePAR-accretive properties is evident in its development advance program. In the nine months ended September 30, 2025, Wyndham deployed $73 million in development advance notes, expecting to invest approximately $110 million for the full year 2025. These investments are crucial for attracting higher FeePAR hotels, with properties entering the system at a FeePAR premium roughly 40% above the current system. This disciplined capital allocation ensures that new additions strengthen the portfolio and enhance future earnings power.

Wyndham's global retention rate improved to 95.7% in 2024, a testament to its "OwnerFirst" value proposition and the support provided to franchisees. This includes initiatives like Wyndham Marketplace with PriceIQ for procurement cost reduction, affordable insurance programs through HUB International, and new F&B partnerships with Grubhub and Applebee's. The company's direct franchising model, particularly in international markets like China, EMEA, and Latin America, is proving highly successful, driving double-digit net room growth and significantly higher royalty rates compared to legacy master licensee agreements.

Financial Performance and Liquidity

Wyndham's financial performance in the first nine months of 2025 reflects a resilient business model adapting to a challenging macroeconomic environment. For the three months ended September 30, 2025, fee-related and other revenues decreased 4% year-over-year to $382 million, primarily due to a 5% decline in global RevPAR and lower franchise fees, partially offset by an 18% increase in ancillary revenues and net room growth. Despite the revenue decline, adjusted EBITDA for the quarter remained flat year-over-year on a comparable basis at $213 million, as operational efficiencies and cost containment measures offset elevated operating expenses related to the co-branded credit card program, insurance, litigation defense, and employee benefits. Adjusted diluted EPS for the quarter was $1.46, up 1% on a comparable basis, benefiting from share repurchases.

For the nine months ended September 30, 2025, net revenues increased 3% year-over-year to $1,095 million, largely driven by a $29 million increase in ancillary revenues from the co-branded credit card program and royalty rate expansion. Total expenses decreased 6% year-over-year, benefiting from lower transaction-related expenses (absence of 2024 hostile takeover defense costs and impairment charges) and marketing expenses, partially offset by higher operating and general and administrative expenses. Adjusted EBITDA for the Hotel Franchising segment increased 4% to $603 million for the nine-month period.

The company maintains a strong liquidity position. As of September 30, 2025, total liquidity was approximately $540 million, which increased to $790 million in October 2025 following an amendment and extension of its revolving credit facility.

This facility's capacity was increased to $1 billion and its maturity extended to 2030, while reducing borrowing costs by 35 basis points. Adjusted free cash flow for the nine months ended September 30, 2025, was $265 million, with a conversion rate from adjusted EBITDA of 48%. The company returned $320 million to shareholders year-to-date through $223 million in share repurchases and $96 million in dividends, demonstrating its commitment to shareholder value. The first-lien leverage ratio stood at a healthy 2.90 times as of September 30, 2025, well within the covenant of 5 times.

Competitive Landscape and Positioning

Wyndham operates in a highly competitive global hospitality market, directly contending with major hotel franchisors and operators such as Marriott International (MAR), Hilton Worldwide (HLT), InterContinental Hotels Group (IHG), Hyatt Hotels Corporation (H), and Choice Hotels International (CHH).

Wyndham's core competitive advantage lies in its extensive portfolio of value-oriented brands, particularly in the economy and mid-scale segments. This positioning allows it to cater to a resilient blue-collar and leisure traveler base, which has historically shown less sensitivity to economic downturns compared to the upscale and luxury segments favored by some peers. For instance, Wyndham's select-service hotels outperformed STR's upscale and above segments by 300 basis points during 9/11, 500 basis points during the global financial crisis, and 2,500 basis points during COVID. While luxury segments have seen ADR growth significantly outpace inflation (up 29% to 2019), economy ADR is up 11% to 2019, suggesting future pricing power for Wyndham's segments as consumer confidence stabilizes.

Wyndham's asset-light franchising model offers operational flexibility and lower capital intensity compared to competitors that engage in more direct management or ownership. This model enables rapid scalability and adaptability to diverse markets. The company's global development pipeline, with a FeePAR premium of over 30% domestically and 25% internationally compared to its existing system, underscores its ability to attract higher-quality properties. Wyndham Rewards, consistently ranked as the #1 hotel loyalty program by USA Today readers, is a powerful tool for customer retention and direct booking, contributing a record 53% share of occupancy for domestic hotels.

However, Wyndham faces challenges. While its technology stack is robust and AI initiatives are innovative, some larger, more premium-focused competitors like Marriott and Hilton may have greater resources for aggressive digital transformation and personalized guest experiences. The company's reliance on franchisees, while offering flexibility, can lead to quality inconsistencies if not managed diligently, though Wyndham's global retention rate of 95.7% and high Net Promoter Scores indicate strong franchisee engagement. Indirect competitors, such as short-term rental platforms like Airbnb (ABNB), also present a threat by offering alternative lodging options, particularly in urban markets. Wyndham counters this by focusing on its established brand loyalty, consistent quality, and direct booking advantages through its advanced technology.

Outlook and Risks

Wyndham's full-year 2025 guidance reflects a cautious yet confident outlook amidst ongoing macroeconomic uncertainties. The company now expects full-year constant currency global RevPAR to range between down 3% to down 2%, a reduction from prior estimates due to softening trends in Q3 2025. This implies a fourth-quarter global RevPAR decline of 7% to 4%, with U.S. performance expected to lag international regions. Despite this, the company projects net room growth of 4% to 4.6%, demonstrating continued development momentum.

Fee-related and other revenues are now anticipated to be between $1.43 billion and $1.45 billion. Adjusted EBITDA is projected to be between $715 million and $725 million, a modest reduction of approximately 2% from prior outlooks, largely offset by disciplined cost management and operational efficiencies. Adjusted diluted EPS is expected to be $4.48 to $4.62, based on a diluted share count of 77.5 million. The company's long-term adjusted EBITDA CAGR from 2024 to 2026 is still expected to be approximately 8.5%, indicating confidence in its strategic trajectory beyond near-term RevPAR volatility.

Key assumptions for the outlook include continued strength in blue-collar and infrastructure-related demand in the U.S., which is expected to provide a modest pricing boost. Leisure demand is also anticipated to improve. The company expects to deploy approximately $110 million in development advances in 2025, consistent with prior years, to attract high FeePAR properties.

Several risks could impact this outlook. Macroeconomic conditions, including persistent inflation and consumer caution, particularly affect Wyndham's price-sensitive economy and mid-scale guests. Geopolitical tensions and global trade disputes could further dampen consumer sentiment and travel demand. The company faces a concentration risk with a large franchisee, holding approximately $155 million in development advance notes, loans, and receivables as of September 30, 2025. While collateral is believed to exceed exposure, there's a risk of insufficiency if the franchisee cannot secure long-term financing. Litigation, particularly approximately 65 pending matters related to alleged sex trafficking, presents an unpredictable risk, though the company believes potential exposure of up to $7 million in excess of accruals will not materially impact its financial position or liquidity. Foreign currency fluctuations, especially in highly inflationary economies like Argentina, also pose a risk.

Conclusion

Wyndham Hotels & Resorts presents a compelling investment thesis rooted in its resilient, asset-light franchising model, strategic focus on FeePAR-accretive growth, and a commitment to technological innovation. Despite a challenging RevPAR environment, particularly in the U.S. economy segment, the company's historical outperformance during downturns, driven by its blue-collar guest base and extensive network in drive-to markets, underscores its fundamental strength. The robust global development pipeline, coupled with a deliberate strategy to remix its portfolio towards higher-value properties and expand direct international franchising, positions Wyndham for sustained long-term earnings growth.

The company's significant investments in AI-driven technology, such as Wyndham AI and Wyndham Connect PLUS, are not merely incremental improvements but foundational differentiators that enhance operational efficiency for franchisees, drive direct bookings, and unlock new ancillary revenue streams. The accelerating growth of its co-branded credit card program and the innovative Wyndham Rewards Insider subscription further solidify its competitive moat. While near-term RevPAR trends warrant careful monitoring, Wyndham's strong balance sheet, disciplined capital allocation, and proven ability to generate substantial free cash flow provide ample flexibility to navigate market dynamics, invest in strategic initiatives, and consistently return capital to shareholders. The company's strategic responses to competitive pressures and its technological leadership are critical indicators for its continued success in the evolving hospitality landscape.