Wyndham Hotels & Resorts Q2 2025 Earnings Call Transcript

Quartr
Provided by Quartr
July 24, 2025

Key Takeaways

  • Positive Sentiment: Company reported 4% global system growth with over 30,000 net room additions in the first half, marking a record pace and a development pipeline of 255,000 rooms, up 5% year-over-year.
  • Positive Sentiment: Second quarter adjusted EBITDA rose 5% and EPS increased 11%, generating approximately $170 million of adjusted free cash flow year-to-date and returning nearly $220 million to shareholders.
  • Positive Sentiment: Ancillary fee streams accelerated by 19% in Q2 and 13% year-to-date, driven by the renewed co-branded credit card agreement and strategic partnership integrations.
  • Negative Sentiment: Global RevPAR declined 3% in constant currency (US RevPAR down 4% and normalized down 2.3%), prompting a reaffirmed full-year RevPAR guidance of down 2% to up 1%.
  • Neutral Sentiment: Company issued a notice of default to its Super 8 master licensee in China due to agreement violations, excluding this portfolio from its reporting metrics with immaterial financial impact.
AI Generated. May Contain Errors.
Earnings Conference Call
Wyndham Hotels & Resorts Q2 2025
00:00 / 00:00

There are 10 speakers on the call.

Speaker 5

Would now like to turn the call over to Mr. Matt Capuzzi, Senior Vice President of Investor Relations. Please go ahead, sir.

Operator

Thank you.

Speaker 4

Good morning and thank you for joining us. With me today are Geoff Ballotti, our CEO, and Michele 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 and at investor.wyndhamhotels.com.

Speaker 4

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 Geoff.

Operator

Thanks, Matt. Good morning, everyone, and thanks for joining us. Today we reported another strong quarter of progress with global system growth of 4% and sequential net room growth across every region we operate in. We grew comparable adjusted EBITDA by 5%, and we grew EPS by 11%. Despite the challenging RevPAR environment, we drove an increase of nearly 20% in our ancillary fee streams, and we saw continued expansion in both our U.S. and in our international royalty rates. Year to date, our resilient, highly cash-generative business model has produced approximately $170 million of adjusted free cash flow, and we've returned nearly $220 million to our shareholders. The second quarter reaffirmed our team's owner-first commitment as we registered over 6,000 owners and strategic sourcing partners for the Wyndham Global Conference in May.

Operator

As one of the largest gatherings of hoteliers in the world, our conference was designed to empower our owners with major new initiatives to increase their revenues and guest service, to lower their costs, and to strengthen their operating performance. We unveiled several new cutting-edge, technology-driven tools including Wyndham Gateway, a new centralized Wi-Fi login system that creates new ancillary revenue opportunities and eliminates loyalty program enrollment requirements for participating hotels. Building on our very successful guest engagement platform, Wyndham Connect, we launched Wyndham Connect Plus, an AI-driven guest engagement platform designed to enhance the guest experience and improve hotel operations, utilizing automated text messaging and voice assistance to facilitate bookings, to answer questions, and to provide tailored recommendations. This platform is also designed to drive more direct bookings, to reduce front desk workloads, and to create personalized guest experiences.

Operator

Since being launched at our conference, over 1,100 of our over 5,000 hotels already on Wyndham Connect have now enrolled in Wyndham Connect Plus. We introduced Wyndham Marketplace with PriceIQ to reduce procurement costs, access better pricing, and simplify supply chain processes. We debuted new strategic F&B partnership integrations with Grubhub, with Applebee's, and with SBE's Everybody Eats to increase guest satisfaction by offering chef-driven restaurant-quality offerings without the need for extensive equipment or large back-of-the-house operations. We launched affordable, high-quality insurance programs through a partnership with Hub International to provide tailored solutions to improve coverage and lower costs at a critical moment for franchisees amidst rising insurance premiums.

Operator

Inside, we introduced Wyndham Rewards Experiences, leveraging partnerships with world-renowned sports and entertainment brands like Madison Square Garden, Radio City Music Hall, and Minor League Baseball, allowing our 120 million members to use their points to bid on premier live events as well as unforgettable once-in-a-lifetime memories. Franchisee satisfaction with what they learned and how they believe this conference will improve their business was higher than in any past conference, as was their confidence in the years ahead. Last month, we released our first annual Hotel Owner Trends Report, a multi-month effort which surveyed hundreds of developers and owners from the United States, Canada, and the Caribbean. The results reveal an industry full of owners who remain confident in its resilience and long-term growth prospects. Nearly all of those surveyed responded that they're open to exploring branded offerings, underscoring the value that strong brands deliver compared to operating independently.

Operator

When ranking the most critical factors in selecting a brand, these owners and developers pointed to support and executive leadership as top priorities, followed by a strong loyalty program and access to best-in-class technology. More than 90% of respondents expressed optimism about the next five years, and while they acknowledged the challenges posed by the current macro environment, 4 out of 5 owners also indicated plans to expand their portfolios via either new construction or new unit additions. Our owners' confidence in their brands and their future with Wyndham was once again reflected in our growing openings, signings, and net room growth. This quarter, we opened over 16,000 rooms in Q2, bringing June year-to-date new additions to over 30,000 rooms, a record first half of openings for our company and 3% higher than last year.

Operator

Q2 contract signings increased 40% to prior year, driving another 5% growth in our global development pipeline to a record 255,000 rooms. This was the 20th consecutive quarter of pipeline growth, a development pipeline with an average feePAR premium. That's approximately 30% higher domestically and nearly 15% higher internationally versus the existing domestic and international rooms in our system. Domestically, our midscale and above brands grew 3% with new construction openings like the La Quinta Olive Branch located just minutes from Graceland, Elvis Presley's historic home in Memphis, Tennessee, and strong conversion activity with new additions like the Hilo Hawaiian Hotel on the Big Island and the Airport Honolulu Hotel on the island of Oahu, both converting to our Trademark Collection by Wyndham brand. Internationally, we increased net rooms by 8%.

Operator

EMEA grew net rooms by 5% with several new construction additions like the beautiful new Wyndham Alanya Resort on Turkey's Mediterranean coast, while also growing their development pipeline by 34%. Just last week, we announced a development agreement with Gurgaon-based Signet Hotels, who will be developing our La Quinta and Registry brands across India, Bangladesh, Sri Lanka, and Nepal. Latin America and the Caribbean grew its pipeline by 16% and increased net rooms by 4% with new construction openings like the Dazzler by Wyndham Salta in the cradle of Argentinian history and folklore, and several new high-quality conversions like the first HQ Hotel and Residence by SBE, a $100 million development on the northern tip of Antigua, Hodges Bay Resort and Spa, a proud member of our growing Registry Collection brand in the lifestyle luxury segment.

Operator

In Southeast Asia, in the Pacific Rim, net rooms grew by 13% with new build additions like the Wyndham Saleh Da Nang Resort, highlighting our rapid expansion in Vietnam where our system size now exceeds 7,000 rooms. In China, our team grew net rooms by another 16% in our direct franchising system with high-quality new conversions and stunning new construction additions like the Days Hotel by Wyndham Suzhou Dushu Lake and the Wyndham Garden Shanghai Pudong, our 50th Wyndham Garden in China. As we've shared on our last two earnings calls, our Super 8 China master licensee has struggled to add new units and retain existing ones. Following an operational review this quarter, we identified violations of the license agreement by this master licensee and subsequently issued them a notice of default, a potential outcome of which could include termination.

Operator

As a result, we revised our reporting basis to exclude the impacts of these rooms from our reporting metrics. As a reminder, the financial impact of this portfolio is immaterial to our overall results as Michele will discuss in a moment. We focus on our development of higher feePAR brands and geographies, on building scale in markets where we have a strong footprint and strong growth potential, and on expanding direct franchising in regions previously reliant on master license agreements. We're adding hotels with stronger economics that drive meaningful royalty rate accretion. This quarter, our royalty rate increased by another 6 basis points domestically and by 13 basis points internationally. By continuing to focus our development on higher feePAR properties and geographies, we're enhancing the continued long-term earnings potential of our system. On a global basis, RevPAR declined 3% in constant currency.

Operator

International RevPAR grew 1% with strength across all regions except Asia Pacific, which was down 9% on continued softness across China. EMEA RevPAR grew 7% with strength across Europe and the Middle East. Latin America and the Caribbean RevPAR grew by 18% driven by strong ADR and higher feePAR additions in Brazil, Mexico, and the Caribbean. Canada RevPAR grew by 7% with lower U.S. outbounds. U.S. RevPAR declined 4%. About 150 basis points of this decline was driven by the lapping effect of the solar eclipse in April of last year and the timing of the Easter holiday, which shifted into the second quarter of this year. On a normalized basis, our second quarter RevPAR declined approximately 2.3%, consistent with our expectations and a 60 basis point improvement from the 3% normalized RevPAR decline we reported for March.

Operator

Higher for longer interest rates, persistent inflation, and uncertainty around immigration and trade have created an environment of ongoing economic volatility for economy and midscale guests who remain especially sensitive to these dynamics. Also, as expected, we saw significant acceleration in our ancillary fee growth this quarter given the full quarter of benefit that our renewed co-branded credit card agreement delivered, combined with our growing strategic partnership initiatives and our significant and ongoing technology innovations. Collectively, our ancillary revenues have now grown 13% for the first half of the year, pacing in line with our full year expectations. Before Michele takes us through the financials, we'd like to take a moment to thank and recognize our teams around the world.

Operator

The continued success of our Owner First Operating philosophy, which was on full display at our Wyndham Global Conference this quarter, is a direct result of their unwavering commitment and dedication. We're incredibly grateful to our team members who consistently put our owners at the

Operator

Very heart of everything it is that we do.

Operator

Their passion fuels our momentum, and their confidence in the road ahead reinforces our ability to deliver exceptional value to our shareholders, our guests, and our franchisees each and every day. With that, I'll now turn the call over to Michele. Michele.

Speaker 7

Thanks Jeff and good morning everyone. I'll begin my remarks today with a detailed review of our second quarter results. I'll then review our cash flows and balance sheet followed by our outlook. Before we begin, let me remind everyone that the comparability of our financial results continues to be impacted by the timing of our Marketing Fund spend. In the second quarter of this year, Marketing Fund revenues exceeded expenses by $3 million compared to expenses exceeding revenues by $5 million in the second quarter of last year. To enhance transparency and provide a better understanding of the results of our ongoing operations, I will be highlighting, as usual, our results on a comparable basis, which neutralizes the Marketing Fund impact.

Speaker 7

Additionally, as Jeff mentioned, beginning this quarter we've revised our reporting methodology to exclude the full Super 8 China Master License portfolio from our reported system size, RevPAR, royalty rate, and related growth metrics. Given the operational challenges of obtaining accurate information from this Master Licensee and the uncertain outcome of this compliance process, while we work through our compliance actions, we'll continue to recognize fees due to us under the master agreement, which contributed less than $3 million to our full year 2024 consolidated adjusted EBITDA. We also updated our full year net room growth guidance to reflect this reporting change, raising the low end of that range by 40 basis points. Historical results for comparability can be found in Table 6 of our earnings release with additional background and context provided on slide 25 of our investor presentation. Now moving to second quarter results.

Speaker 7

In the second quarter we generated $397 million of fee-related and other revenues, and $195 million of adjusted EBITDA. Fee-related and other revenues increased $31 million year over year, primarily reflecting higher royalties and franchise fees, a 19% increase in ancillary fee stream, and higher pass-through marketing, reservation, and loyalty revenues due to our Global Franchisee Conference in May, which is held about every 18 months. The increase in royalties and franchise fees reflects system growth of 4%, higher other franchise fees and royalty rate improvement, partially offset by a 3% decline in global RevPAR. Ancillary revenue growth meaningfully accelerated this quarter as expected, driven by the full quarter impact of our renewed long-term co-branded credit card agreement, which is also fueling stronger loyalty engagement across our portfolio.

Speaker 7

Adjusted EBITDA grew 5% on a comparable basis reflecting our revenue growth, partially offset by higher operating expenses primarily related to the growth in our credit card program and the absence of insurance recoveries recognized in the second quarter of last year. Adjusted diluted EPS for the quarter was $1.33, up 11% on a comparable basis driven by our EBITDA growth, the benefit of share repurchases and lower depreciation and amortization, partially offset by higher interest expense. Adjusted free cash flow was $88 million in the second quarter and $168 million year to date, with a conversion rate from adjusted EBITDA of approximately 50%. At our current trading levels, our adjusted free cash flow yield of 6% remains the highest in the lodging sector. Development advance spend was $23 million in the second quarter, bringing our year to date total to $51 million.

Speaker 7

We continue to see an increased appetite for our brands, with global openings up 3% so far this year and we're happy to put our excess cash to work in order to position us in key markets and high demand locations that attract feePAR-accretive properties into our system. We returned $109 million to our shareholders during the second quarter through $77 million of share repurchases and $32 million of common stock dividends. Year to date, we have now repurchased 1.7 million shares of our stock for $153 million. We closed the quarter with approximately $580 million in total liquidity and our net leverage ratio of 3x remains as expected at the midpoint of our target range. At this leverage ratio, our current outlook implies up to $550 million of capital available for deployment this year.

Speaker 7

After dividends, of that, we've earmarked $110 million for key money, leaving nearly $400 million for share repurchases or strategic transactions. Through the first half of the year we've deployed about $200 million, largely taking advantage of a depressed stock price, leaving ample capacity for additional capital return or opportunistic investment in the back half. Turning now to outlook, as we've already mentioned, our net room growth outlook is now 4% to 4.6%, up from 3.6% to 4.6% to reflect the removal of our Super 8 China master licensee. We are also raising our EPS outlook to a range of $4.60 to $4.78 to reflect the impact of second quarter share repurchases. This outlook is based on a lower diluted share count of 77.8 million shares and as usual assumes no additional share repurchases or incremental interest expense associated with any potential borrowing activity.

Speaker 7

To maintain our leverage at 3.5 times, we are reaffirming our expectation that full year constant currency global RevPAR growth will range between down 2% to up 1%. As we shared last quarter, we purposefully set a wider range to account for ongoing volatility and uneven demand across markets and we continue to believe that range remains appropriate today. When normalized for the headwinds from the solar eclipse and Easter timing, second quarter performance was within that range. Should we see a near term resolution to global trade tensions, consumer sentiment and demand could recover as quickly as it softened and with our largest volume months still ahead, we believe this outlook reflects the range of potential outcomes in today's environment.

Speaker 7

There are no changes to the remainder of our outlook nor to our expectations for the marketing fund to break even on a full year basis, give or take a few million dollars. With respect to seasonality, we expect the marketing funds to underspend by roughly $10 million in each of the third and fourth quarters in order to land at approximately breakeven for the full year. In closing, our second quarter results reflect steady execution across key priorities, growing our system with high quality feePAR-accretive rooms, accelerating ancillary revenues, expanding our royalty rates and delivering on our earnings targets. With a strong balance sheet and highly cash generative business model, we're well positioned to navigate near term headwinds while continuing to invest in long term value creation. As always, we remain committed to disciplined capital allocation and generating consistent meaningful returns for shareholders.

Speaker 7

With that, Geoff and I would be happy to take your questions. Operator.

Speaker 5

Thank you very much, Ms. Allen. Ladies and gentlemen, the floor is now open for your questions. At this time, if you do have a question or comment, 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. We ask that you please limit yourself to one question. Thank you. We'll go first this morning to David Katz of Jefferies.

Speaker 5

Morning everybody. Thanks for taking my questions. First, just a quick comment. With respect to China, I know we're not going to talk about it, but I know this has been an issue since 2018 and I hope it works out in a productive way. My question, Geoff and Michele, is around RevPAR in your segments. We see the weekly numbers and it's been pressured. My hope is that you can help us unpack a bit what's going on on an even more granular level with RevPAR, which is pressured in a lot of areas but not all. I'd love just a little walk around on what you're seeing with respect to RevPAR and maybe when we might start to see some growth.

Speaker 5

Thank you.

Speaker 5

Sure. Thanks, David. As we've always heard you say, RevPAR lasts for a day and pipeline lasts for a lifetime. This has been more than a day. Q2 RevPAR was down 2.3% normalized versus the down 2.9% we ran in March. Slide 11 in our investor presentation lays that out.

Operator

July month to date has been generally.

Operator

Consistent with the STR results, with continued softness in the Sunbelt states like Texas.

Operator

Florida and California, where we have about.

Operator

A quarter of our system, but it's been offset by strength in oil markets like Ohio, up 4% in the quarter and up July to date, Oklahoma up double digits, and natural gas states like Pennsylvania, which was up 6% in a quarter, combined with strengths in the large Midwest industrial states. Matt put a green shoots chart in 11 where we're seeing strength RevPAR wise in states like Wisconsin, Michigan, Minnesota, Missouri, all indicating steady demand from our blue collar everyday travelers. Softness is more leisure focused in those large Sunbelt border states that I just mentioned. In terms of going forward, the next two weeks of July are, as you all know, our most important weeks of the year.

Operator

In August, we'll see a stronger.

Operator

Summer travel season, which we're happy about given the favorable school calendars with more schools starting later this year than last year per STR. While the demand shift happened very quickly and while optimism certainly abounds for continued resolution of the global trade tensions and improved consumer sentiment, we're not seeing anything structurally to your question that concerns us. Pricing is holding steady.

Operator

ADR year over year was essentially flat.

Operator

In the quarter and is up 17% to 2019, which is trailing inflation by a full 7 points. We're not seeing any trade down opportunities or impact. In fact, the gaps between those chain scales continue to strengthen with little signs of any discounting or compression. If you just look at the last quarter, the $50 gap between economy and upper midscale is now over $65, and the $80 gap last quarter between upper mid and upper upscale has moved up as well. Nothing structurally that concerns us. Our most booking lead times of late is essentially.

Operator

Flat to last year.

Operator

The average length of stay are consistent with last year, in fact up about 3.3% to pre-Covid, and our cancellation rates have actually improved somewhat over the last year by about 60 basis points. Economy is still, you know, humming. Our guests are more employed. They have healthy balance sheets and household incomes that continue to strengthen each month. David, we run internal research on our guests that point towards more optimism on travel intent and less concern about economic worries than both last year and even last month. We look at all the research, we get our hands on syndicated research that's out there, and we continue to see consumers with more plans to travel the next six months. I think it was 94, 95% up from 89% in the first quarter.

Operator

Consumer spending on travel is continuing despite the macro headlines, and we remain optimistic that RevPAR long term 2 to 3% Smith Travel domestic RevPAR CAGR is going to return, especially given the historical low levels of supply that we've been seeing.

Operator

I do appreciate the credit and the answer.

Operator

Thank you.

Operator

Thank you, David.

Speaker 5

Thank you. We'll go next now to Brandt Montour of Barclays.

Speaker 5

Good morning.

Speaker 5

Thanks for taking my question. Geoff, I want to, or Michele, I want to talk a little bit more about net unit growth expectations and just sort of how your expectations for the year have evolved since the beginning of the year. We know that construction in the U.S. has been challenged and starts have been challenged for all the reasons we all know. Has the mix shift for your expectations changed between starts on new construction openings versus conversions, and how are those sort of pieces evolving throughout the year for you?

Speaker 7

Great. Thanks, Brandt.

Speaker 7

I'll start and then talk about outlook for the year. I mean, Brandt, our near term optimism just continues to grow from an openings and executions and a pipeline start and certainly a net room growth both domestically and internationally.

Operator

We are just a.

Operator

High level on openings. We have been so happy in terms of the accelerating net room growth in the higher feePAR segments that we've continued to see. There's a good slide in nine in the IP that points to those record openings pacing ahead of prior year, as is the first half of NRG, and from an execution standpoint, just thrilled with how our teams have performed this year. The pipeline is larger, it's stronger than ever, and our franchise sales teams really around the world have been more productive than they've ever been. That pipeline continues to skew higher domestically. It's been in the last few years growing from about 35% domestic to 42% as you see in our investor presentation this quarter, driven by really strong domestic executions, up 6% to last year, and international executions of 11,000 rooms, up significantly 400 basis points internationally.

Speaker 7

Great.

Speaker 7

Thanks, Eric.

Speaker 7

I would just add to that, Brandt. Our expectations for net room growth have remained largely consistent throughout the year, although the composition has improved in both quality and visibility as the year has progressed. At the start of the year we set the range at 3.6% to 4.6%, which has now been raised to 4% to 4.6%. That reflects the removal of the Super 8 China Master License Agreement, and also the continued strength in the development activity that Geoff mentioned and the record first half openings, as well as the growth in our pipeline and the 23% year to date increase in executions. We're really pleased with the development momentum.

Speaker 7

Perfect.

Speaker 7

Thank you both.

Operator

Thanks, Brent.

Speaker 5

Thank you. We go next now to Dany Asad of Bank of America.

Speaker 5

Good morning, Geoff and Michele.

Operator

More of a strategic question here.

Operator

How does this incident with the.

Operator

Super 8 China master licensee approach.

Operator

Change your approach to China or other international markets going forward? Does it accelerate even more the want or need for direct franchising? Yeah, I mean we've been saying, Dany, thanks for the question, consistently that we're no longer signing master license agreements to grow and that these agreements that were entered into over 20 years ago with local developers before we had franchise sales teams located in those markets, as we do today, were why we did it back then. We have very strong teams, as we've talked about before on these calls, in China. I believe we have the biggest, largest, most successful franchise sales team over there today. We're absolutely committed. As we've been talking about consistently, we've seen continued development acceleration in our direct franchising business. To your question on both the openings and the executions front, no slowdown.

Operator

It's grown 12% on a compounded annual growth rate since 2020. That's our direct franchising business. It's on pace this year to deliver double digit growth again. We have increased our direct franchising business in China by over 100% since spin to nearly 100,000 rooms, and that is at three times the royalty rate.

Operator

We have about 400 direct hotels.

Operator

Now in our pipeline.

Operator

Q2 is another great example. We opened 5% more rooms direct.

Operator

That drove the 16% net room growth in our direct feePAR-accretive rooms. Our teams executed really strongly again, 26 new deals, more than last year with a new construction pipeline that's growing. These are contracts that are about 3/4 weighted to new construction, 1/4 to conversions. There is a lot of excitement, there's a lot of development out there. We continue to add new brands to Wyndham Grand, Wyndham Garden, Wingate, Ramada.

Operator

They've all been really performing well for us.

Operator

We took back a master license Days Inn. We just signed our 110th Days Inn over there. We've added 25 Microtels. Nobody thought we'd be adding La Quintas, but I think the team just opened their fifth over there. The team is very committed, we're very committed to growing across the country. They're firing on all cylinders. Thank you very much. Thanks, Dany.

Speaker 5

We'll go next now to Steven Pizzella of Deutsche Bank.

Operator

Good morning and thank you for taking our questions. Wanted to focus more on the credit card. You noted ancillary fees grew 19% into the two Q and in the deck. I believe you expect low teens growth for 2025 overall. How should we think about the acceleration of the second half of this year and into 2026?

Speaker 7

Hey Steve, we were really, really pleased with the performance of our ancillary revenues in the second quarter. They were, as you mentioned, up 19%, right in line with the acceleration that we had expected. A large portion of that growth came from our co-branded credit card program. In the first half, we saw a 5% increase in new accounts alongside a 2% lift in average spend per cardholder. These are really strong indicators of engagement, and we expect that momentum to continue throughout the remainder of the year. On a year-to-date basis, we're at that 13%, which again is right in line with our low teens full year expectation. We expect that the back half is going to produce similar results.

Operator

Okay, great.

Speaker 7

Thank you. Thank you.

Speaker 5

We will go next now to Lizzie Dove of Goldman Sachs.

Speaker 7

Hi there. Thanks for taking the question. I just wanted to ask about the key money environment, what you've been seeing recently, whether it's gotten more competitive, whether more kind of money per deal has been required now. Thanks. Hi Lizzie. I'd say it's pretty consistent. We're really pleased with how successful the teams have been penetrating the mid scale and above space, bringing in higher feePAR deals, strategy's working and we can't think of a better place. You know, we're really thrilled to be putting some of our excess free cash flow to work here. Our openings are up 4% year to date. Our contract signings are up again that 23% year to date. We're at every table and this tool is helping us win deals. The deals this year so far have brought in feePAR that's 36% higher than our existing system.

Speaker 7

There's real value in this money that we're deploying and I think it's a pretty consistent environment. Thanks.

Speaker 5

Thank you. We'll go next now to Michael Bellisario of Baird.

Speaker 7

Thanks.

Speaker 7

Good morning, everyone.

Speaker 7

We're surprised you're honored. Oh, Michael, number three. No, not yet.

Speaker 7

Patiently or maybe impatiently waiting. Geoff, you haven't talked about Echo Suites yet. Maybe just what's the latest and greatest there in terms of signings and starts for that brand, and then also maybe just the latest update on the growth trajectory for the brand with your multi-unit owners who are the initial developers versus maybe thinking about doing more one-off deals going forward. Thanks, Sherry.

Operator

We're doing more one-off deals.

Operator

The team continues to execute, and when you look at the new construction executions, which were up, if I talk broad pipeline, up 9% to prior year, driving that new construction pipeline, which I think a lot of folks think is slowing down, it's not for us. Our new construction pipeline is up 4% year over year. Record 1,500 hotels.

Operator

Echo played a role in that.

Operator

Our new construction Echo pipeline this quarter grew another 3% to prior quarter. We signed 1,600 new rooms with those individual developers.

Operator

We're at roughly, we're north of 30,000.

Operator

Rooms and we're growing that pipeline. We've seen recent openings in Texas, let's see, Tennessee, Virginia, last week, Reno, oh and yesterday we just opened another Echo Suites I hear in Katy, Texas. Unfortunately I couldn't be there, but we had new signings this quarter in Oregon, in Utah, in Washington. Again it was multiple new developers and we've got nearly a dozen open, another dozen or so under construction, and another 30 sites in active development in really strong markets like coming soon. Sterling, Virginia, Fort Worth, Texas, off the top of my head, Pasadena, oh and Naples, Florida. Great new unit that'll be opening. Their performance to date is pacing on track and we have several of these hotels already achieving RevPAR index levels of over 100%. They're not all there yet, they're ramping towards that.

Operator

What is exciting to us is that these developers are putting mid scale, upper mid scale, and in some cases upscale competitors in their market in their comp sets as they continue to look to push that average daily rate and most importantly extended stay occupancy levels to a level that we haven't seen before in any of our brands. We've said all along we'd have 300 open by 2032 and with over, I think now over 280 executed contracts in our pipeline and that interest in conversations with new developers, both multi units still interested but more so now that the big multi unit territories are locked down, continuing to express interest, to continue to build on a one off basis. We're feeling very good about that number.

Operator

I have just one follow up, I guess. When do you expect to take the brand international? That's all from me.

Speaker 5

Thanks.

Speaker 5

Yeah, we are talking. In fact, we're meeting with our Divisional Presidents next week about Latin America, perhaps Mexico being the first, but probably in the next year.

Speaker 7

We already have agreements in place in Canada.

Speaker 7

Yeah, that is an international country.

Operator

Thanks Mike.

Speaker 5

Thank you. We'll go next now to Patrick Scholes of Truist.

Speaker 4

Hi.

Speaker 4

Good morning Geoff and Michele.

Operator

Hey Patrick.

Speaker 7

Good morning, sir.

Speaker 4

Good morning.

Speaker 4

I wonder if you can lay out what you see as the range of the various possible outcomes with the China notice of default. I'm not asking what you see as the most likely or the most desirous, but really, what are the possible outcomes that you see in this current scenario?

Operator

Thank you.

Speaker 7

Yeah, you know Patrick, this is an active compliance process, so I don't think it would be appropriate for us to discuss those details publicly. We can say, of course, this could lead to a variety of outcomes including termination of the Master.

Speaker 4

Okay.

Speaker 4

Is it possible any of those outcomes could end up being a net positive for you folks?

Speaker 7

Sure. It's just too early to speculate on potential outcomes. I can definitely see a few paths where this could be a positive for Wyndham, for the sublicensees, and even potentially for the Master.

Operator

Okay, we'll leave it at that.

Speaker 7

Thank you.

Operator

Thanks Patrick.

Speaker 7

Thank you.

Speaker 5

We'll go next now to Dan Wasiolek of JPMorgan.

Speaker 5

Hey, good morning everyone. Thanks for taking my question. I wanted to touch on the net room growth. As you know, obviously this is an area where you do have some visibility. How are you thinking about this? The kind of growth rate as you think about 2026, is that level 4% to 4.5% achievable? Any kind of semblance, just given the momentum of Echo Suites that you talked about, on how to think about the breakdown of growth between U.S. and international? Similarly, one quick housekeeping, Michele, for the net room growth outlook this year, you raised the low end by 40 basis points but kept the high end. Were there any kind of changes other than the MFA that just, you know, because it seemed like it would kind of affect both ends of the range. Thanks.

Speaker 7

Okay, there's a lot in there to unpack. Let me see if I can remember all the questions. I'll start with the last one. I'd say no. Our net room growth outlook today reflects increased confidence. As we move halfway through the year, we have greater clarity around production for the year, more visibility, better kind of quality information. We feel as confident as ever in being able to achieve that net room growth guidance, which also, by the way, does reflect a 20 basis point increase at the midpoint of the guide as a result of the changes we made for the Super 8 China master licensee.

Speaker 7

It's still too early to really talk about 2026, but I'd say our long term growth objective has always been 3 to 5% and we're clearly above that 3% in 2025 and we would expect that we can continue to deliver on those growth targets. We've got a record pipeline with a significant portion of that new construction pipeline already being in the ground and under construction. We've got continued momentum in the midscale and extended stay, which are really positive fundamentals and where demand remains strong and financing is still very much available. We've got greater contribution from international markets, but most importantly higher feePAR international markets again under that direct franchising base and again with more accelerated growth coming out of the higher feePAR regions such as EMEA.

Speaker 7

We feel like there's really high quality net room growth happening here and that should continue well into 2026 and beyond.

Speaker 5

Thank you. We'll go next now to Stephen Grambling of Morgan Stanley.

Operator

Hey, thanks so much. Two quick follow ups. First, on Lizzie's question around key money, just given the success here, do you generally anticipate potentially loosening up the purse strings? I guess in the past you talked about it as an eyedropper to deploy more or what are the guardrails investors should be thinking about with that deployment?

Speaker 7

Oh, I hope our development team isn't listening. Yeah, Geoff has referred to it as an eyedropper. I think we are always very judicious in how we deploy our capital. We want to make sure that any key money that we're deploying is returning the proper economic value to our shareholders, and any deals would be assessed kind of through that lens. I don't anticipate needing to increase the key money meaningfully beyond the levels contemplated in our current outlook. Our strategy hasn't changed. We still want to prioritize investment in high quality growth and make sure that those returns are meeting or exceeding our hurdle rates. I think we're fortunate enough to be able to be judicious but also opportunistic.

Speaker 5

Thank you. We go next now to Ian Zaffino of Oppenheimer.

Speaker 5

Hey, good morning. This is Isaac Salazan on for Ian. Thanks for taking all the questions. I think we've covered a lot already. My question is just on the positive RevPAR trends you're seeing in the Midwest and industrial markets. If you could just touch on, you know, if that mix is being driven by both ADR and occupancy, or is there anything to call out as far as sizing the occupancy uplift from infrastructure. Thanks.

Operator

It's been more, you know, rate has.

Operator

Been, has been as I said earlier, steady. Our rate in the quarter and rate July to date has been flat to last year, and I think, you know, to the infrastructure point, we are beginning to see some reacceleration in those Midwest states and really across the country in spending. Our global sales, our Wyndham sales infrastructure room nights that are contracted, we're seeing them pick up, they're up about three times what the consumed is. That's business on the books. That's pacing ahead.

Operator

If you look at the eight.

Operator

Midwest states that we noted in our investor presentation, which combined saw second quarter RevPAR growth of, I think it was, over 500 basis points. Over 100 basis points of that was driven by hotels near large infrastructure projects. While infrastructure, as we've talked on the last call and this call, is slower than what we saw in the fourth quarter, it is similar to what we saw more broadly then. We believe that as those national priorities continue to crystallize, that business should pick up. The headlines and the administration's focus is on getting the balance of those allocations out and spent. The priority now appears to be certainly faster highway project starts, faster bridge and transportation starts. On the flip side of that, we continue to see very strong public and private data center construction starts, energy construction starts, semiconductor investment starts.

Operator

That's giving our teams a lot to go after. They've identified 150 planned data center projects within 15 miles of a Wyndham hotel, and they're hunting these projects using a combination of reporting and technology and networking with contractors. I believe we have a slide in there for the top 10 data center projects under construction. The RevPAR for our hotels within 10 miles of those was up 500 basis points better year to date than those hotels in markets further away from the project. Every day a new data center project is being announced, and we still continue to view this as a great multi-year tailwind for our hotels, our owners, and our sales teams.

Speaker 7

Yeah, in those Midwest states you mentioned, Geoff, I think we're up about 100 bps in RevPAR on the infrastructure market.

Speaker 7

Exactly. Michelle.

Speaker 5

Thank you. We go to Alex Brignall of Redburn.

Speaker 5

Thank you very much for taking the question. Following up on the pipeline question and the nugget questions that have been asked.

Operator

Could you just give a little bit?

Operator

More on your retention rate both in terms of the existing estate, which has obviously been on a positive trajectory as we go through the year. Maybe looking into outer years, how you're thinking about that, if there's any new thoughts, and then within the pipeline, if there's anything you can say on any dropouts of pipeline projects or whether that's still all proceeding as you would hope. Obviously, those ones will be for outer years. There are a few questions yesterday on Hilton's call about the positive expectations they had for Q4. Now, the cadence of RevPAR is a little different because of the tier that you are in relative to them. Q4 seems like a relatively tough compare for in the U.S., so just any thoughts that you have there on your expectations would be great.

Speaker 5

Thank you.

Speaker 5

Okay, Alex, I will start and then Michele could fill in anything that I missed and I'll let her talk about the question Q4, RevPAR expectations. You asked about pipeline and pipeline fallouts. We're not seeing anything as Michele rightly alluded to, we're seeing an increase in starts and, you know, just great additions to that pipeline where our teams from an execution standpoint are really, you know, adding to it. As we talked about, 229 contracts signed in the quarter, 40% up to last year and domestic rooms executed. We're really happy about what's happening in the U.S. is now pacing 7% ahead same time last year, but no fallouts. You asked about retention and we're really pleased with the steady progress that we've seen since then and really nothing different in terms of our narrative on retention.

Speaker 5

We've always said that we've had a long term retention goal in these segments we operate in of about 96% and when we spun out we were in the 93s. We've moved it to the 94s to 95s last year and right now at 6:30 we're running 95.8% on our rolling 12 month retention rate, which is how we look at it. Importantly, we have the highest net promoter scores and quality scores our brands have ever seen or enjoyed. Our overall satisfaction rate with our brands domestically was up 350 basis points year on year.

Speaker 5

A huge shout out to our DFO teams, our Directors of Franchise Operations who are out there across the country every day saying goodbye to franchisees that aren't living up to our quality standards after trying to work with them to get there, but continually improving the quality and improving along those lines along with everything else we're doing, especially on the technology front, our retention rates. Michele, you want to talk about Q4? Michele?

Speaker 7

Yeah, sure. Undoubtedly it is a tougher comp. Last year we benefited from hurricane-related relief efforts, elevated demand that we saw on the Gulf Coast and the Southeast market. That was about 150 basis points. That is a headwind to the fourth quarter comp in the U.S., and that's already reflected in our guidance for the full year. We're certainly not expecting to repeat at that same level.

Speaker 5

Thank you. Just a quick reminder, ladies and gentlemen, any further questions today, please press Star one. We'll go next now to Meredith Jensen of HSBC.

Speaker 7

Yes, hi. Thanks. I was wondering if you might speak to the slide that discusses the $550 million that could potentially go to shareholder returns or business development. I know you mentioned sort of earmarked for key money, but sort of what you're thinking in terms of opportunities there and what that might be. Sure. I think that slide really represents the art of the possible with respect to this year's capital allocation. If we look at our excess free cash flow and then the leverage capacity that we had, we would have about $550 million to deploy in the year. I think about $110 million of that is earmarked for key money, and that leaves a considerable amount remaining for whether it's share repurchase or what we call strategic transactions, further investment in the business.

Speaker 7

I think about half of that has been deployed already, including for opportunistic share repurchases. As we've always said, investing in our business is our top priority. We are doing that primarily through the DAN program today. We continue to allocate capital toward those higher quality deals that help us grow our system and then increase our feePAR, which is a key pillar of our long term strategy. As we look to the back half of the year, I think you can expect us to continue to balance an active deal environment with opportunistic share repurchases, and that's how we would expect to deploy our capital this year.

Speaker 5

Thank you. It appears we have no further questions this morning. Mr. Ballotti, I'd like to turn things back to you for any closing comments.

Speaker 5

Thank you very much, Leo.

Operator

Thanks everyone for your questions.

Operator

Your interest in Wyndham Hotels & Resorts.

Operator

Michele, Matt and I look forward to talking to and hopefully seeing many of you.

Operator

You in the weeks and months ahead.

Operator

In the meantime, we'd like to remind.

Operator

All of you golf fans to tune in to the Wyndham Championship next week. It is the final tournament of the PGA Tour's regular season before the playoffs begin. It's become a playoff in and of itself where there is an awful lot at stake. Coverage begins one week from today, July 30, next Thursday on the Golf Channel and continues over the weekend on CBS with Jim Nantz and his incredible crew.

Operator

You'll be able to catch.

Operator

Our new linear TV advertising spots where we're very proud of where there's a Wyndham, there's a way. Have a great rest of your summer, everyone, and thanks again for joining us today.

Speaker 5

Thank you, Mr. Ballotti. Thanks, Ms. Allen. Again, ladies and gentlemen, this does conclude today's webinar, Wyndham Hotels & Resorts second quarter 2025 earnings conference call. Please disconnect your line at this time and have a wonderful day.

Speaker 5

Goodbye.

Operator

Thanks. Boy.

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