Wyndham Hotels & Resorts said that the “everyday business traveller” was a “steady and reliable” segment which had been less disrupted than others by the pandemic.
The comments came as the group reported its third-quarter earnings, seeing growth in conversions, leaning on economy brands.
Geoff Ballotti, CEO, told analysts: “As the backbone of America’s workforce, our everyday business travellers have continued to travel and seek a safe and comfortable stay after a workday on the road.
“As a lodging leader for these everyday business travellers, we are not relying on air travel, international in-bound large convention-based corporate travel, which is one reason why our business is uniquely positioned to continue to outperform."
The CEO said that two thirds of Wyndham’s business bookings come from the infrastructure industries, including construction crews, utility workers and engineers. While this travel demand declined 49% in the second quarter, it rebounded in the third quarter with the business down 24%, a 25 point improvement sequentially. Approximately 70% of the company’s bookings were leisure-oriented with the other 30% coming from business travel.
To support the “everyday business traveller”, the group launched Wyndham Direct, allowing booking through a direct channel with a Wyndham Direct ID number. All guestroom and incidental charges were processed through the platform, with one monthly bill and without the need for company credit cards.
Wyndham reported revenues of $144m, down 36% in the third quarter, reflecting a 38% decline in global revpar. Adjusted Ebitda declined $89m to $101m. Occupancy peaked at 50% in July, as the summer travel season was in full swing and pulled back to 49% in August and 47% in September.
Full-year global revpar was expected to be down approximately 40%, with the fourth quarter expected to see a drop of 30% to 35%. Asia-Pacific was the strongest performing region, with hotel occupancies in China returning to near normal levels.
CFO Michele Allen said that breakeven for franchisees was around 30% occupancy, depending on how they were capitalised. She said: “At an LTV of 70%, which is on average where our franchisees are leveraged or capitalised, we expect the majority of them will be able to breakeven in the low 30s and that has not changed.”
Globally, the group’s pipeline grew 3% sequentially to approximately 185,000 rooms, with a 6% increase in conversion rooms and a 1% increase in new construction rooms.
Ballotti said: “Our deal teams need to be allowed to travel again. They can’t be constrained again and we are certainly concerned in terms of our European teams being able to get out and about right now.”
Commenting on the transactions market, he said: “I think the bid/ask needs to narrow on hotels that are going to transact. There is so much significant cash on the sidelines both with owners and with funds, but there is not yet a lot of transaction.”
The company signed 152 hotel agreements in the quarter, over 30% more than it executed in the second quarter. In the US, it signed 11% on the year, driven by a 23% increase in conversion signings slightly offset by a decline of 4% in new construction signings.
During the period the company strengthened its financial position, with the CFO commenting that “the credit markets were too attractive to ignore in August”. As a result, it raised $500m by issuing eight-year bonds, which was used to repay a portion of its outstanding revolver borrowings.
Ballotti concluded: “Despite all of the challenges our industry is facing, our drive-to leisure-focused franchise business has never been better positioned for growth.”
Insight: The lusted-after segment of this results season is rapidly showing itself to be the “everyday business travellers”, those travellers who are not likely to be affiliated with a massive corporate, but who have to get out on the road and see their clients, to keep their businesses going.
Much like the non-minted leisure guest, that other new-found hero of the pandemic, “everyday business travellers” have not traditionally been courted by the big global operators, but have been left to the franchise-driven groups such as Wyndham and, as we will be hearing next month, Choice, to enjoy. There ain’t much glamour, but it’s good, solid business.
Franchisees are drawn to brands which can bring in decent earnings, even if the hotels are not the trophy assets where you can have your chums over for cocktails and grouse shooting. This is pushing conversions along and it also tends to mean that Wyndham’s owners are a more sober bunch who haven’t over-leveraged and, it is hoped, are at less risk in the tough times. Not immune - Ballotti repeated that he was pushing for aid from government - but capable of weathering a storm.