Ballotti: Wyndham positioned to remain open, recover
 
Ballotti: Wyndham positioned to remain open, recover
29 JULY 2020 9:53 AM

Wyndham Hotels & Resorts executives touted steady improvement in second quarter performance, compared to pandemic-period lows, despite a 61% decline in global RevPAR year over year.

PARSIPPANY, New Jersey—Despite the company’s worse-than-50% declines year over year in key performance metrics, Wyndham Hotels & Resorts executives are encouraged by recent trends, including 15 consecutive weeks of occupancy growth across Wyndham’s U.S. portfolio.

Occupancy across the company’s select-service portfolio has grown from a pandemic-driven low of 26% in April to nearly 60% in July, and month to date, occupancy has averaged nearly 50% across the U.S., Wyndham President & CEO Geoff Ballotti said on a call with analysts to report second-quarter earnings.

This growth reflects strength in drive-to leisure destinations, as well as a predominately franchised (more than 95%) model which has enabled Wyndham to keep most of its hotels open during the pandemic, he said.

In the U.S., Wyndham’s hotels grew occupancy in 35 states, including California, for the week ending 24 July, he said.

“Today, over 99% of our 6,300 domestic hotels are open,” Ballotti said. “While we are seeing some plateauing in harder-hit, larger markets like Florida, Texas and California, we are seeing continued occupancy improvement in smaller markets such as Colorado Springs, Lake Michigan and the Texas Gulf Coast.”

He added that occupancy continues to improve across the company’s international portfolio as well, with better than 60% occupancy in China currently. In Canada, where 98% of Wyndham’s hotels are open, occupancy is in the 40% range; and in Europe and the Middle East/Africa region, where two-thirds of hotels are open, occupancy is over 30%.

“Latin America remains our most-challenged region, with over 100 hotels still closed and occupancy at less than 30%,” Ballotti said.

CFO Michele Allen said the company’s positioning for recovery is evident in the fact that “during the most challenging quarter the industry has ever experienced,” Wyndham was able to keep adjusted earnings before interest, taxes, depreciation and amortization positive.

Another sign of strength is that average daily rate has held steady and even ticked up along with occupancy, she said, noting that ADR for Wyndham’s economy and midscale brands has increased by 15% on average on weekdays and 30% on weekends since April.

By reducing costs and capital spending by $101 million during the quarter, the company was also able to support franchisees through fee waivers and deferrals, she said.

Still, Ballotti acknowledged that despite company efforts to support franchisees, it’s inevitable that some will not be able to remain “afloat.”

Although the company sees particular opportunity in growth through conversions in late 2020 and throughout 2021, “given the unusually lower year-to-date openings” and hotels anticipated to exit in Q3 and Q4, Wyndham is not anticipating positive net rooms growth this year, Allen said.

Second-quarter results
Wyndham reported a 51.6% year-over-year decline in net revenues to $258 million in Q2, and a net loss of $174 million, according to a company earnings release.

Also for the quarter, global revenue per available room declined 61% compared to Q2 2019, and adjusted EBIDTA was $63 million, down 60.4% year over year.

Q2 RevPAR was down 55% at the company’s U.S. hotels and 75% internationally.

Systemwide room count remained flat in Q2, as the company opened 62 new hotels totaling 5,700 rooms, a year-over-year decline of 65% “as new-construction openings were delayed and conversion volumes were lower,” the release stated.

Wyndham’s development pipeline shrank by 4% year-over-year to approximately 1,300 hotels with 180,000 rooms, “as a result of softer sales activity in the second quarter due to travel restrictions, increased hurdle rates and a more conservative probability factor applied to projects in the pipeline which have not yet secured financing,” according to the release.

Approximately 64% of the company’s pipeline is international, and 76% is new-construction, 34% of which have broken ground.

As of press time, Wyndham Hotels & Resorts’ stock was trading at $46.35, down 26.2% year to date. The NYSE American Composite Index was down 19.9% for the same period.

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