Business Overview and History
Wyndham Hotels & Resorts, the world's largest hotel franchising company by number of properties, has proven its resilience and ability to adapt to changing market dynamics. With a focus on strategic expansion, operational excellence, and innovative solutions, Wyndham has positioned itself as a leading player in the hospitality industry.
Wyndham Hotels & Resorts was initially incorporated as Hospitality Franchise Systems, Inc. in 1990 to acquire the Howard Johnson brand and the franchise rights to the Ramada brand in the United States. The company was an integral part of Wyndham Worldwide Corporation and its predecessor from 1997 to 2018. In May 2018, Wyndham Hotels became an independent, publicly traded company after being spun off from Wyndham Worldwide, now known as Travel + Leisure Co.
Prior to the spin-off, Wyndham faced competition among hotel franchisors and lodging operators, with franchisees making decisions based primarily on the perceived value and quality of the brand and services offered. The success of individual franchisees was influenced by factors such as location, property quality, number of competitors in the vicinity, community reputation, and general, regional, and local economic conditions.
Wyndham's diverse portfolio and widespread presence helped mitigate the potential impact of these conditions on its performance. The company's system was dispersed among approximately 6,200 franchisees, reducing its exposure to any single franchisee. One master franchisor in China for the Super 8 brand accounted for 12% of the company's hotels, while no other franchisee accounted for more than 2% of its hotels.
As a global company, Wyndham's business is subject to various foreign and U.S. federal and state laws and regulations. Its franchisees must comply with local laws and regulations in each country where they operate, including employment laws and practices, privacy laws, and tax laws. Additionally, the company and its franchisees are subject to regulations such as the Americans with Disabilities Act and similar legislation in jurisdictions outside the United States.
Today, Wyndham operates a portfolio of 25 brands, primarily located in secondary and tertiary cities, with approximately 80% of the U.S. population living within ten miles of at least one of its affiliated hotels. The company's asset-light business model, with a focus on franchising, has allowed it to maintain a flexible cost structure and limit capital needs, enabling it to navigate industry challenges effectively.
Financial Performance and Metrics
Financials
In the latest full fiscal year (2024), Wyndham Hotels & Resorts reported net revenues of $1.41 billion, a 1% increase from the previous year. The company's net income for 2024 stood at $289 million, unchanged from 2023. Wyndham's adjusted EBITDA, a key profitability metric, grew 5% year-over-year to $694 million in 2024.
The company's financial ratios paint a picture of a financially sound and well-managed organization. As of December 31, 2024, Wyndham had a debt-to-equity ratio of 4.55, a current ratio of 1.00, and a quick ratio of 1.00, indicating a healthy liquidity position. The company's return on assets and return on equity stood at 6.84% and 45.69%, respectively, demonstrating efficient utilization of its asset base and strong shareholder returns.
Liquidity
Wyndham's quarterly performance has also been noteworthy, with the company reporting a 7% year-over-year increase in fee-related and other revenues to $341 million in the fourth quarter of 2024. Adjusted EBITDA for the quarter grew 12% on a comparable basis, driven by higher fee-related revenues and ongoing margin expansion.
As of December 31, 2024, Wyndham had $765 million in total liquidity, including $103 million in cash and $662 million available under its $750 million revolving credit facility. The company's strong liquidity position provides flexibility for future growth initiatives and helps mitigate potential risks.
Geographic Performance
Wyndham operates globally, with a presence in over 95 countries. In 2024, 78% of royalty contribution came from the U.S. and Canada, 8% from EMEA, 6% from Asia Pacific, and 3% from Latin America. This geographic diversification helps to spread risk and capitalize on growth opportunities across different regions.
Expansion and Growth Strategies
Wyndham's growth strategy has been centered around strategic expansion, both organically and through acquisitions. The company has been particularly successful in capitalizing on the surge in infrastructure spending and the rise of the data center industry in the United States.
In 2024, Wyndham opened a record 68,700 rooms globally, representing a 4% year-over-year increase. This included nearly 28,000 new rooms in the U.S., which also grew 4% year-over-year. The company's focus on midscale and above segments, as well as the extended stay market, has been a key driver of this growth.
Wyndham's development pipeline reached a record 252,000 rooms as of the end of 2024, a 5% increase from the previous year. Notably, the company's pipeline in the midscale and above segments, including its ECHO Suites brand, now represents nearly one-third of its total domestic development pipeline.
The company's strategic expansion has also been driven by its focus on higher FeePAR (fee per available room) properties. In 2024, the FeePAR of Wyndham's domestic openings represented a 36% premium over the rooms that exited the system, while the FeePAR of international openings represented a 27% premium.
Adapting to Shifting Market Trends
Wyndham has demonstrated its ability to adapt to evolving market trends, particularly in the areas of technology and customer preferences. The company has made significant investments in its digital capabilities, including the development of its Wyndham Connect platform, which automates various customer-facing tasks and enhances the guest experience.
Additionally, Wyndham has been successful in attracting a younger and more affluent customer base, with the share of Gen Y and Gen Z guests growing by 130 basis points in 2024 compared to the previous year. The company's average household income of $104,000 is over 9% higher than in 2023, reflecting its ability to cater to the evolving demands of its target demographic.
Wyndham's Wyndham Rewards loyalty program has also been a key driver of customer engagement and retention. The program now has over 114 million enrolled members globally, an 8% increase year-over-year, and accounts for more than 50% of check-ins in the United States.
Navigating Challenges and Risks
Like any major player in the hospitality industry, Wyndham faces its share of challenges and risks. The company's operations are subject to various regulations, both domestically and internationally, which require ongoing compliance and adaptation. Additionally, the company's international expansion exposes it to currency fluctuations, political instability, and other geopolitical risks.
The COVID-19 pandemic had a significant impact on the hospitality industry, and Wyndham was not immune to its effects. However, the company's asset-light business model and focus on operational efficiency allowed it to navigate the crisis more effectively than many of its peers.
Wyndham and certain of its subsidiaries have been named as defendants in litigation matters filed in state and federal courts, alleging statutory and common law claims related to purported incidents of sex trafficking at certain franchised and managed hotel facilities. As of December 31, 2024, the company is aware of approximately 50 pending matters. The company has not made a determination as to the likelihood of any probable loss and is unable to estimate a range of losses at this time.
Looking Ahead Guidance and Outlook
For the full fiscal year 2025, Wyndham Hotels & Resorts is guiding for fee-related and other revenues to be in the range of $1.49 billion to $1.51 billion, including $15 million of EBITDA-neutral revenue related to the Global Franchise Conference. The company expects adjusted EBITDA to be between $745 million and $755 million, reflecting year-over-year growth of 7% to 9%.
Wyndham's adjusted diluted earnings per share (EPS) is projected to be in the range of $4.66 to $4.78, representing an increase of 8% to 10% compared to the previous year. The company's free cash flow conversion before development advances is expected to range between 57% and 60%.
For 2025, Wyndham expects global net room growth to accelerate to a range of 3.6% to 4.6%. Global RevPAR growth is expected to be 2% to 3% on a constant currency basis (around 150 basis points lower when accounting for currency effects).
The company also noted that it expects a 3-year adjusted EBITDA CAGR from 2024 to 2026 of approximately 8.5%.
Industry Trends and Positioning
The hotel industry is predicted to see continued growth, with the extended stay segment expected to grow nearly 30% from $21 billion in 2024 to $27 billion by 2028. Wyndham has positioned itself to capitalize on this trend, with its extended stay brands like ECHO Suites, Hawthorn Suites, and Wyndham Residences representing nearly one-third of its domestic development pipeline.
Wyndham is a global leader in the economy and midscale chain scales, with its brands representing approximately 30% of branded rooms in the United States. Additionally, the company has a strong presence in the upper midscale chain scale. As of December 31, 2024, the Hotel Franchising segment had 5.98 million properties and 501.80 million rooms in the United States, and 3.31 million properties and 401.20 million rooms internationally.
Conclusion
Wyndham Hotels & Resorts has demonstrated its ability to navigate industry challenges and capitalize on emerging opportunities. With its asset-light business model, strategic focus on higher-quality properties, and innovative digital solutions, the company has established itself as a leader in the hotel franchising industry.
As Wyndham continues to expand its global footprint, particularly in the midscale and above segments, and leverages the infrastructure boom in the United States, the company is well-positioned to deliver long-term value for its shareholders. The company's diversified portfolio of hotel brands, asset-light franchising business model, and focus on operational excellence and growth initiatives have positioned Wyndham as a leader in the global hotel industry.