Wyndham regains heights of 2019

Origin Wyndham

Wyndham Resorts & Hotels, the world’s largest franchise hotel company, has reported financial results that in many instances show growth over pre-pandemic 2019.

Geoff Ballotti, President and CEO said: “Our economy brands here in the United States actually exceeded 2019 RevPAR (revenue per available room) for the quarter.”

Mr Ballotti said he thought that the pandemic was bringing fundamental change to the hotel industry. “We believe new travel behaviours could disrupt traditional patterns.”

Leisure travel accounts for more than two-thirds of Wyndham’s custom with most of the rest in what it termed: “everyday business travel.”

He pointed out that household savings are at a ten-year high and travel is a top priority for many people relieved to be seeing pandemic restriction eased. He said more people were wanting to take more holidays with weekend breaks or four-night stays increasingly popular.

He said people were travelling to see family and for sports events. Beach destinations and hotels in or near national parks were also busy.   

Mr Ballotti also said that occupancy had risen on Sunday and Monday nights which have long been quiet in the hotel industry.

Wyndham’s operations outside the US, which account for around two-fifth of its rooms, are recovering more slowly. Still, Wyndham’s financial improvement across the board came as the company reduced overhead expenditure. Expenses fell from $452 million in the second quarter of 2020 to $273 million a year later. Total expenses were $471 million in the 2019 period.

In June this year, the company said, RevPAR for all its US businesses overtook 2019 levels. La Quinta and Ramada are among the brands that operate under the Wyndham umbrella.

For the current full year, Wyndham said that its adjusted net income is likely to be in the range of $244 million to $254 million. It was $157 million in 2019.

The strengthening allowed the company to increase its quarterly dividend payment by 50%. The payment is now back to 75% of pre-pandemic levels. The company indicated, moreover, that there was scope to enhance future shareholder returns via dividends and share buybacks.

Overall RevPAR was $36.92 in the second quarter of 2021, more than double the 2020 number.

Second quarter adjusted earnings before tax, interest, depreciation and amortisation (EBITDA) was $168 million this year. It was $161 million in 2019. It was $66 million in the pandemic-struck equivalent quarter of 2020.

Current full year adjusted EBITDA will be between $525 million and $535 million, the company said. It was $621 million in 2019.

Overall RevPAR is on course to increase about 40% versus 2020 though it would be below 2019 levels by about 16%.

Insight

It is tempting to assume that the pandemic has had comparatively little impact on Wyndham Hotels & Resorts. First half and second quarter figures posted on 29 July showed growth against many 2019 pre-Covid comparables.

In fact, the pandemic has had, and is having, a very large impact on the world’s largest franchise hotel operator. How come? The health scare has sparked changes in travel patterns which are, in Wyndham’s case at least, especially noticeable in the United States.

People are taking more holidays. They are taking short breaks. They are driving rather than flying to destinations. So, the ramifications of the pandemic for the company are telling.

It is apparent that Wyndham has navigated the pandemic well. If the pandemic has ushered in a new dynamic, the company will continue to reap handsome rewards. It is quite possible, however, that travel patterns revert to pre-pandemic norms.