Wyndham Hotels & Resorts, Inc. (WH) on Q1 2021 Results - Earnings Call Transcript
Operator: Good day and welcome to the Wyndham Hotels & 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. I would now like to turn the call over to Matt Capuzzi, Senior Vice President of Investor Relations. Please go ahead. Matt Capuzzi: Thank you, operator. Good morning and thank you for joining us. With me today are Geoff Ballotti, our CEO; and Michele 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. Geoff Ballotti: 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 Michele will cover later. Most notably in China, we’re 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 lengthen in 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 9 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. Michele Allen: Thanks, Geoff. Good morning, everyone. I'll begin my remarks today with a detailed review of our first quarter results followed by an update on our capital allocation strategy and a brief note on outlook. Throughout my discussion today, I'll provide comparisons not only to prior year, but also to 2019, which we believe are more meaningful as prior year results were already impacted by COVID-related travel restrictions, and therefore are of little help in analyzing recent trends and recovery prospects. Operator: We'll take our first question today from Joe Greff with JPMorgan. Please go ahead. Joe Greff: Hi, good morning, guys. Geoff Ballotti : Good morning, Joe. Joe Greff: My first question is on removal/retention, you know, the churn was better in the first quarter and specific to the first quarter, but is that that lower removals are a function of progress in your March to get to 96% retention or is it really a function on how the timing is between quarters in 2021? And as you think about your views on retention and churn, you know, relative to three months ago, are you more favorable? Geoff Ballotti: I think it's both Joe. Terminations certainly have some seasonality to them, and Q1 is normally our lowest termination period. So, you know, yes, we do believe that annualizing our Q1 rate is – we would be at 97%. I think it is getting a bit ahead of ourselves for the full-year. But you know, that said, we're very happy with the progress we've been making in retaining our most valuable franchisees and I think it gives us great confidence in getting back to that 95% level. We're not seeing anything out of the ordinary right now. Foreclosures are still – as you and I have talked about less than 0.5% or 1% of our system. And we were really pleased to see the terms improve not just two prior year, but to 2019 levels. In fact, they were down more to 2019 than they were to prior year. And, you know, to the back part of your question, we've been making significant progress, obviously with everything that we've been talking about over the last few quarters, in terms of moving our termination rates from . And, look, of course, our teams out there still believe we could do better. We achieved a 96% retention for our big days in and Super eight brand is back in 2019, and we've got plenty of brands like Microtel, that run higher retention rates at 97, or La Quinta, which has been running at 98%. So, you know, we're focused on getting back to that 95% this year, and then moving up to 96 over time. Joe Greff: Great, thank you. And then, a follow-up question, probably for Michele or for anybody, with regard to your RevPAR sensitivity, the 1 percentage point is 2.8 million per annum or 700,000 per quarter on average, how does that – anything about that RevPAR sensitivity across the 2Q and through the 4Q? Michele Allen: Good morning, Joe. I think that – I wouldn't think it would be too far different across the quarters. I think you could pretty much straight line it without significant variance there. The third quarter is obviously our largest earnings quarter, but it's not going to be very meaningful to your overall model. Joe Greff: Got it. And then just one final question, is the 49 million related to the absence of marketing funds spend? How does that – how do you see that allocate through the balance of the year? How much of that was realized in the first quarter? Michele Allen: The marketing fund was I believe it overspent about $5 million. It was favorable $5 million year-over-year in the first quarter. So, 5 of the 49 was realized in Q1. Joe Greff: Got it. And then for the balance of the year, is it relatively even or is it more heavily weighted to the summer months? Michele Allen: Oh, yeah, it would not be even at all. It would be definitely more heavily weighted, I believe in the second and Q4 for sure. Joe Greff: Got it. Thanks, guys. Good job. Michele Allen: Thank you. Operator: Our next question is from David Katz with Jefferies. Please go ahead. David Katz: Hi. Good morning, everyone. The, you know, among the more prevalent topics for us and across the industry is really, you know, conversions and conversion sales. You know, I'd love just a little more color on just how competitive that is, you know, how optimistic you are for it, and, you know, its ability to drive, you know, an accelerating NUG as we go forward. Geoff Ballotti: Sure, it's absolutely competitive. You hear all of our peers talking about it on each of their calls, David. We're thrilled in seeing, you know, our conversion activity continue to pick-up and it picked up as we expected it to be, and we talked about on the last call. It moved from the mid-70s to over 90% of our room opens domestically, and we were really pleased to open more rooms domestically this year than last year. And it moved from the mid-30s, internationally to over 50% of our opens internationally. So, our international teams are actually seeing it too in terms of just how strong our value proposition is right now to independent hotels, in terms of, you know, where our teams are focused on. In Asia Pacific, they're seeing it; in Europe, they're seeing it. Our conversion rooms doubled, for example, in China, and they were higher across the board, internationally. So, look, all our teams are very focused on driving the number. We did not cut back on any of our franchise sales teams throughout this pandemic. Our leaders did a great job not only keeping them in place, but giving them more resources and more support. We're deploying existing sellers to our conversion brands. And we saw that in our conversion pipeline, our conversion pipeline grew both domestically and internationally sequentially. We're seeing great interest domestically in our Travelodge in Days Inn brands. And overseas, we're seeing good interest in Armada and especially our Wyndham brands. And I think the opportunity, the last part of your question is it's – you need franchise sales teams in place, and we have those teams in place. And when you look at the size of the independent market with 100,000, independent hotels out there, they report to Smith Travel. We're looking at most of those independent hotels in the segments we plan. 45,000 of those 100,000 independents are in the economy, for example, and 25,000 are in the mid-scale. So, we're really optimistic and really pleased with the progress. David Katz: Alright. Thank you. And just as a follow up, you know, Michele, look, I think one of the concerns we have as we sit down to focus on models, just given how strong things have – strongly things have accelerated, you know, help us not get too carried away, you know, with the remainder of the year. And, you know, maybe just give us a couple of balanced thoughts on how we should look at our models for the back half? Michele Allen: Okay. I'm happy to do that, David. I think when we think about the back half of the year, we feel really confident in our ability to predict the select-service segment and the trends that we're seeing for select-service. We still feel as if there's a great degree of variability in full-service and in the international markets. And they're quite temperamental. So, while we're really encouraged by what we're seeing in China, what we want to be, what we want to be, I would say more confident in is the ability to see a sustained recovery without further interruption. And so, that's something that we're certainly looking forward to. I think there's plenty of upside to the back half of the year, but nothing that we would be willing to commit to until we start seeing a little bit more, a little bit more consistency in the full-service and international performance. David Katz: Great. Perfect. Thanks. Congrats. Michele Allen: Thank you. Operator: Next question is from Patrick Scholes with Truist Securities. Please go ahead. Patrick Scholes: Good morning, everyone. Thank you. Can you give us a little bit of color on your expectations how that net 1% to 2% unit growth will ramp as the year progresses? Thank you. Geoff Ballotti: Sure. You know, again, with Q1 openings in terms and executions, openings were 30% higher terms were down. We were looking for, I think the easiest way to look at it is that, you know, we're assuming we could open and we said this in the last call 80% of what we opened in 2019, which would be 80% of 65,000 rooms approximately 50,000 rooms. And you know that, as we've said, our room’s ramp. We opened roughly 15% of those in the first quarter, which was 5 points more than we did percentage wise back in the first quarter of 2019 when we were growing net rooms at 3%. You know, openings are always back half loaded and will continue to ramp and retention is tracking right now on or slightly above that 95% we're looking for. So, I think, you know, Q1 Q2, we're going to see that growth coming as we saw in the first quarter from international and then we're expecting domestic net rooms to begin to contribute in the back half of the year, Q3 and especially Q4. David Katz: Okay, great. Thank you. Geoff Ballotti: Thanks. Operator: Next question is from Stephen Grambling with Goldman Sachs. Please go ahead. Stephen Grambling: Hey, good morning. Geoff Ballotti: Good morning. Michele Allen: Good morning, Stephen. Stephen Grambling: Just a follow-up on the 2021 projections and sensitivities, last quarter in the deck, I think you had some potential areas of upside that were unrelated to RevPARs such as license fees ancillary fees and bad debt expense. So, any color you can provide in thinking about what will drive the sensitivity of these other areas upside that aren’t RevPAR related? Michele Allen: Yes. So, we have the same slide in the deck this quarter Slide 34. And I would say, as far as the license fees go, I don't see that as being likely upside the – right now based upon the guidance that Travel & Leisure gave for Q2 and their Q1 performance, we think they would have to see a significant increase in the second half to reach the $1.6 billion that would be necessary for them to exceed the contractual minimum fees that we are projecting for the full year. So, we don't see that as being material upside for the year for us. We do see upside though, potentially, to the owned hotels. And we did embed that in our $2.8 million RevPAR since sensitivity, which is how we increased – part of the reason why we increased from 2.5 million from February to 2.8 million now and I would say, we were quite pleased with the owned hotels performance. It was a bright spot in the first quarter and then even through April, we saw both our Puerto Rico Hotel and our Orlando Hotel perform better than expected. And so we took up our expectations for both those hotels. And we think that there could be even some more upside beyond what is currently in our expectations depending upon how recovery progresses. And so that's potential upside. The other two areas are ancillary fees and bad debt, and so while we believe we have a reasonable forecast for both of those right now, they're both a little outside of our control and depending on franchisee behavior, and so there could be upside to those. We're not banking on it. But that's certainly something that we're watching and continue to adjust in our forecasts when and if we see trends that would indicate favorability. Stephen Grambling: And then an unrelated follow-up, everyone's been focused obviously on this path to recovery, but even before the pandemic, I know you've implemented a number of company specific initiatives, including leveraging a relationship with imparity, and your loyalty program, can you just remind us of what was implemented, where we are in that – in leveraging, you know, those initiatives and how that might position the business for growth beyond just a recovery? Geoff Ballotti: Sure, yeah. I mean, we think it's been a big piece Stephen of our share game this year, I mean, and positions us very well for recovery. We've talked about before, for big initiatives, our new customer data platform, which as your referenced was the imparity partnership we had. What we did with Salesforce in terms of automating all of our franchisees workflow, and improving our franchise sales teams to those which was really important. What we've done on the mobile booking app, which again, we think is the fastest three step mobile booking app, which will tell the when they're driving down the road where our nearest hotel is to pull over to and check into, and it is – it's been just huge for us. It's bookings year-to-date or up 50%. We're really, really pleased to see that. And then I think, you know, the biggest thing for us longer-term is what we've been doing on the business side and our business travelers is, as we've talked about a lot is a segment that has been giving our franchisees and owners a lot more share and that's everything that we've been working on from a direct billing solution. It is now benefiting all of our negotiated accounts and franchisees, and our ability to attract new accounts and gain more attraction from each accounts is, is that percentage of our business that really allowed our hotels to stay open and never closed, continues to pick up. I mean, there's no better proxy for us then what happened in January and February in the quarter with our mid-week rates, and our mid-week occupancies, which outperformed the weekends when there wasn't a lot of leisure demand up there. And what was down 20% to prior year in Q4, that business segment for us, which again is 30% of our occupancy for our hotels, improve the down less than 10% in the first quarter. Our infrastructure in construction business is now nearly flat to last year. And in the second largest segment in that business, mix for us is what we talked about in the IP that we put out last night. That's our logistics business. That's our trucking and our transportation business, which is actually running ahead. It's 6% ahead of last year. So, all of those initiatives, we think are allowing our global sales teams, our field sellers, to go out and find new accounts to design with us, which again gets back to what has been outside share gains we feel for our brands throughout the pandemic. Stephen Grambling: That's great color. Thanks so much. Geoff Ballotti: Thanks. Operator: Our next question is from Dany Asad with Bank of America. Please go ahead. Dany Asad: HI, good morning, everybody. My question is more – my first one is more on like the more recent trends. So, the sequential acceleration from March to April is pretty significant here. So, you just have a sense for how much of that is due to calendar shifts, spring breaks, and so on, and how sustainable that you know that RevPAR acceleration is as we progress further into the year? Geoff Ballotti: Sure. Thanks for the question, Dany. It certainly had a lot to do, obviously, with spring break being sooner. And we were seeing above peak level occupancies and rates in states like Florida and resorts and hotels like the Wyndham Brand. Clearwater Beach, which was selling out at higher average daily rates than it did back in – during that period in 2019. But in terms of the demand that's out there, in terms of the recent optimism in terms of the global anxiety just continuing to fall, and our booking windows lengthening and our average length of stays lengthening, I mean, it would suggest to us continued pick up through the spring and summer months. Then we'll be looking for that continued business travel segment that we continue to see pick up, you know, continue to help our hotels gain share. Dany Asad: Got it? And then my follow up is a little bit more on the development side. Give us a sense of how much inflation is changing new construction unit economics? And what are you hearing from your developers in terms of, you know, timelines and deliveries and so on? Geoff Ballotti: Michele and I have been traveling quite a bit the last few weeks and we're actually leaving this afternoon, we're heading down to Florida. And what we're hearing from our developers, and I think we'll continue to hear today is that they are beginning to experience, you know, some delays when it comes to deliveries, especially on the sourcing side on the FF&E side. I mean, we've all been following what's going on with lumber, and what we're hearing is how that relates to late beds, because box springs aren't arriving on time or late fixtures in furniture and equipment that, you know have to do with lumber, which by a two by four of late knows that that's tough to do, and it's twice as expensive, but in terms of the overall, you know, 12 months to 18 months that we've talked about, from a development standpoint, you know, it's probably more after permitting, it’s probably more towards the 18 than it was towards the 12. But, you know, I think our franchisees are hopeful and most economics, every economist I read is of the belief that with the easing of quantitative measures, mills are going to return to normal capacity and the production will soon return to normal and delivery will pick back up. But in terms of development, those franchisees of ours with cash are looking for new sites, and are looking for new construction and that's what we've been seeing in the pipeline of our new construction Microtel and La Quinta’s, which we continue to open. Dany Asad : Thank you very much. Geoff Ballotti : Thanks Dany. Operator: Our next question is from Ian Zaffino with Oppenheimer. Please go ahead. Ian Zaffino: Thank you. You know, can you guys maybe talk about some of your discussions with the franchisees? You know, what's your thinking on the labor side, as far as availability of housekeepers, etcetera? You know, has that been a headwind so far, to kind of increase occupancy, that's been, we should expect going forward. And any kind of color on that or, you know, and also sort of the franchisees, you know, what are the steps you're going to do to mitigate that? Is that taking a higher ADR, etcetera? Just some color there. Thanks. Geoff Ballotti : Sure. Ian, it is a great question and it's, I think, if you were to ask, Chip Rogers, our CEO at the American Hotel and Lodging Association he’s had all of us – all the leadership on a call, several calls last week, and this week, it is the number one issue. Right now that's out there. Labor has always been an issue long before this pandemic began. I mean, we've always known that the hotel industry employs 10 million people. And that was before we went into COVID that we were struggling to fill a million jobs. And certainly with the pandemic and unemployment insurance, it's an issue our industry is very, very focused on. It's especially concerning in urban, in group, in meeting and full service destination hotels. I mean, we need more housekeepers. That's what we're hearing. And that's what Michele and I see when we travel. We need more front desk workers, we need more culinary workers, and what the hotel industry is doing to your question is, is advocating on so many different fronts. Last Tuesday, the administration approved an additional 22,000 H2B visa applicants and you know, that's allowing our 66,000, normal, temporary foreign workers to grow to 88,000. But it's a drop in the bucket, and we need more. We're asking the administration for the travel ban to be lifted for all J1 foreign students, that's another 300,000. Let's see, the AHLA is launching I know, a custom portal to attract the young opportunity from across the United States of America, especially in the downtown areas, and getting the word out in terms of what a great industry we have. It is much less of an issue in the select-service space for a company like ours. We don't have the outlets, we don't have the restaurants, we don't have the banquet and catering facilities, but it's certainly top of mind for our ownership. And it was a large part of what – in terms of what we're doing. What led to our new breakfast standards that we put out, you may have seen this week for our economy hotels to really reduce the labor and the for our owners. Everybody’s focused right now on getting our franchisees and our owners back to – now that they're getting back to the occupancy levels, back to the profitability levels that they had in 2019. Ian Zaffino: Okay, great. And maybe a little bit far out here, but you know, can we get an infrastructure bill. How do we think about how that flows through to each of your segments, and you know, I would imagine select-service would do the best, and, you know, as you kind of go up, that they wouldn't benefit as much, but what are kind of your thoughts there and how will we expect the brands to sort of operate and benefit from something like that? Thanks. Geoff Ballotti: Sure. I mean, it's – we're really excited. Whatever shape the country's infrastructure plans might take, our teams are working at trying to find new infrastructure accounts. I mean so many of the targeted, we call them pick and shovel infrastructure companies that are out there that we'd expect to benefit are already customers of ours. We're certainly talking to them about what Stephen asked about all of our new Wyndham business products and our direct billing capabilities. And, I mean, these are the folks that stay in our hotels. We're seeing great success at winning more bids, and gaining more shares. As I said a minute ago, our Wyndham Direct, which was launched in the middle of last year has produced 50% more business in the first quarter sequentially than it did in the fourth. And so look, we're looking at, you know, who's building roads and bridges and the power companies and the computer companies and the broadband companies, and we're going after them and we think that, you know, that combined – infrastructure and construction, your question is about 60% of that 30% mix, and again it's nearly flat to where it was last. It hit down 2%. We’re looking at that and we’re also looking at that logistics business, which we also think with – the U.S. manufacturing segment index at a 37 year high, we think that's a big opportunity for us as well, and we're really focused on winning our business. Ian Zaffino: Great. Thank you very much. Geoff Ballotti: Thank you. Operator: And our next is from Michael Bellisario with Baird. Please go ahead. Michael Bellisario: Good morning, everyone. Geoff Ballotti: Good morning, Mike. Michael Bellisario: Just a bigger picture topic here for me. I want to circle back to the . Interested to hear your view on maybe how you think this deal improves your overall brand platform? What it means from a growth perspective, and then if there's any longer-term financial benefit that you guys might receive as a result of the deal? Any comments there would be helpful. Geoff Ballotti : Yeah. Look, we're thrilled with – I thought it was, you know, just a brilliant move on Wyndham destinations apart from a rebranding standpoint. It is a great brand. You know, our Blue Thread sales, if you were following yesterday, essentially, when you look at sales, it doubled, year-on-year from 7% to 14%. We're incentivized on that – on those new owner sales, and we're doing everything we possibly can to – and there's so many new initiatives. Our two teams are working on to continue to drive new owner sales for Travel & Leisure. We think there's a lot more we could do together on the call center marketing front on the CMP lobby marketing. There's a lot of our franchisees that would love the opportunity to have T&L take over their front desk from a concierge standpoint, and provide their guests with services. And the Blue Thread transaction increased, as Mike Brown said yesterday and is called 200 basis points to 9% of their transactions. There's really no change to the timeshare sales strategy or the timeshare Wyndham branding that we use from a redemption standpoint. It offers us – you know, our Wyndham rewards program just continues to strengthen with all of the great additions that come into the Travel & Leisure World. And so we're very optimistic about the future and our teams are working really well together. Michele, did you want to add anything to that? Michele Allen : No structural changes to the contract ability to earn the licensee fee. Michael Bellisario: Got it. Understood. Thank you. Geoff Ballotti: Thanks Mike. Michele Allen: Thank you. Operator: Our final question today comes from Alton Stump with Longbow Research. Please go ahead. Alton Stump: Great, thank you and good morning. I just wanted to ask quickly, you know, back on company-owned hotels that you had expected Michele in the first quarter, you know just what are the key drivers of that and over the rest of the year? Michele Allen: Yes, thank you. So, actually, at our Puerto Rico hotel, the hotel had benefited from increased air travel and then the island had eased a bunch of the restrictions. So, they saw better leisure performance than we had initially expected. And then once the guests were on property, they were a bit confined and we felt that our on-property spend in some of the outlets, the F&B outlets, Spa, things like that. And so, they had a really great first quarter. At the Bonnet Creek Hotel in Orlando, it's all about rate. What they were able to do was supply to the higher rated as they typically will get in the first quarter with the same rated leisure business, and so there's really great, really great job by the team there. For both hotels, they typically earn about 75% of their EBITDA in the first half of the year. So, there's a, there's a little bit of upside potential in the back half of the year. But I would say, more limited than the first half. Alton Stump: Great. Thanks you for the color. And then a quick follow-up if I could on the labor front, which is certainly a big issue, you know, across hospitality industry, you know, is, you know, is it your thought or is that once you start to see unemployment insurance, you know, as a current, you know, hopefully dries up or we, you know, any kind of step-back, you know, on exploiting that will probably dry up as into that year? So, you know, should that help the labor fund or is there a situation that we're going to continue to see the current tighten environment over the rest of the year? Geoff Ballotti: Yeah, I mean, I think franchisees expectation Alton is that it absolutely should help in September when it goes away. But I can't predict, you know, what else is out there on the horizon from stimulus. Alton Stump: Got it. Makes sense. Thanks so much. Geoff Ballotti: Thanks. Michele Allen: Thank you. Operator: It appears we have no further questions. I'll return the floor to Geoff Ballotti for any closing remarks. Geoff Ballotti: Alright. Well thank you very much and thank you everybody for your continued interest in Wyndham Hotels & Resorts. Michele, Matt, and I look forward to talking to you in the weeks ahead and hopefully being with you in person at one of the many industry events that we’ll be attending this spring and summer as our industry returns to normal. In the meantime, enjoy your spring, and we hope you'll all be out on the road this summer. Stay healthy and we hope to see you soon. Operator: This does conclude today's Wyndham Hotels & Resorts first quarter 2021 earnings conference call. Please disconnect your lines at this time, and have a wonderful day.WH Ratings Summary
WH Quant Ranking
Related Analysis
Wyndham Hotels & Resorts Earnings Beat EPS Estimates Amid Revenue Challenges
Wyndham Hotels & Resorts, Inc. (WH:NYSE) Earnings Overview
Wyndham Hotels & Resorts, Inc. (WH:NYSE) recently reported its quarterly earnings, showcasing a mix of achievements and challenges. The company's earnings per share (EPS) of $0.78 exceeded the Zacks Consensus Estimate by 4%, marking the fourth consecutive quarter of surpassing consensus EPS estimates. This performance is a testament to Wyndham's operational efficiency and its ability to navigate the complexities of the hotel and motel industry. However, despite this achievement, the company's revenues of $305 million for the quarter ended March 2024 fell short of expectations by 1.32% and also saw a decline from the previous year's revenues of $313 million. This discrepancy highlights the ongoing challenges Wyndham faces in generating top-line growth amidst a competitive and ever-changing market landscape.
The stock performance of Wyndham Hotels has seen a decline of about 11.1% since the beginning of the year, underperforming against the broader market as represented by the S&P 500's gain of 6.3%. This underperformance can be attributed to the mixed earnings outlook for the company, with analysts projecting an EPS of $1 on revenues of $374.62 million for the coming quarter, and an annual EPS of $4.19 on revenues of $1.45 billion. Despite these projections, the company's current Zacks Rank of #3 (Hold) suggests that it is expected to perform in line with the market in the near term. This rank, coupled with the stock's recent trading activity, where it experienced a slight decrease of $0.63 to $73.25, reflects investor caution and the need for Wyndham to address its revenue shortfalls and capitalize on its industry's growth prospects.
The broader Hotels and Motels industry, where Wyndham operates, is ranked in the top 38% of over 250 Zacks industries. This favorable industry outlook, along with the anticipation of earnings reports from other industry players like Playa Hotels & Resorts (PLYA), underscores the potential for growth and recovery within the sector. Wyndham's position within this context is crucial, as it navigates through industry challenges and leverages its strengths to enhance shareholder value. The company's dividend offering, with a yield of 2.02%—significantly higher than the industry average and the S&P 500—further highlights Wyndham as a notable dividend stock, appealing to investors seeking income in addition to capital appreciation.
Moreover, Wyndham's commitment to dividend growth, with an annualized dividend of $1.52 marking an 8.6% increase from the previous year, and a consistent annual growth rate of 18.55% over the past five years, positions it as a resilient player in the market. The company's payout ratio of 35% indicates a sustainable approach to returning value to shareholders while retaining enough earnings to fund future growth. This balance between dividend payouts and reinvestment in the business is critical for Wyndham's long-term strategy, especially as it aims to capitalize on the projected earnings growth of 4.49% for 2024. As Wyndham continues to navigate the complexities of the hotel and motel industry, its dividend strategy and industry positioning will be key factors in attracting and retaining investors, particularly in a market environment where high-yielding stocks are increasingly scrutinized amidst rising interest rates.
Wyndham Hotels & Resorts Shares Underperformance is Overdone
Deutsche Bank analysts started coverage on Wyndham Hotels & Resorts, Inc. (NYSE:WH) with a Buy rating and a price target of $79, noting it believes the recent underperformance in shares is overdone and primarily related to regional banking concerns on funding availability for development/unit growth.
According to the analysts, this underperformance offers investors an entry point, adding that it believes fears over the net unit growth outlook and pipeline are exaggerated. At present, the Wyndham pipeline is the healthiest it has ever been, up 13% year-over-year, which, the analysts believe, should drive accelerating net unit growth moving forward.
In addition, the analysts view the company’s select service chain scale exposure as more defensive in a downturn, relative to full service, with select service RevPAR outperforming by approximately 840 basis points on average, over the last three downturns.
