Wyndham Hotels & Resorts, Inc. Common Stock 2026 Q3 Earnings Call

Thank you, operator. Good morning, and thank you for joining us. With me today are Geoff Ballotti, our CEO, and Amit Sripathi, 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. 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 will 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 at investor.wyndhamhotels.com.

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.

Geoff? Thanks, Matt, and good morning, everyone.

We appreciate you joining us today. Many thanks to those of you who've reached out over the past few months. My treatment for multiple myeloma is going as well as I could have hoped. The doctors are happy with my progress, and I'm seeing exceptional clinical results. I feel great, my energy's high, and our leadership team has never been more focused on execution and driving shareholder value. On that note, our Q3 results reflect yet another successful quarter executing against our long-term growth strategies. We reported strong earnings with comparable basis adjusted EBITDA and EPS growth of 5% and 9%, respectively. U.S. RevPAR grew 6%, and we grew our system by 4%, excluding Revo.

On a year-to-date basis, our resilient, highly cash generative business has produced nearly $270 million of free cash flow, and we have returned over $290 million to our shareholders. In addition, last month, our board increased our share repurchase authorization by $400 million, demonstrating continued confidence in our ability to generate significant cash flow and its commitment to continued shareholder returns. Global RevPAR increased 2% in constant currency, a nearly 400 basis point improvement sequentially, driven primarily by domestic RevPAR, which also improved nearly 400 basis points sequentially to up 6% year-over-year. This 6% growth was well ahead of our second half growth expectations and included a favorable impact of approximately 10 basis points from the World Cup. Consistent with historical trends, travel demand for our middle income consumers remains strong despite elevated gas prices.

RevPAR growth was fueled by stronger demand, with occupancy increasing approximately 300 basis points, driven by everyday business travel and broad-based leisure demand. Importantly, our franchisees also experienced continued pricing power, with ADR increasing approximately 280 basis points. Combined strength in demand and pricing created meaningful revenue and margin improvements for our small business owners. We saw sustained growth across nearly all regions, including our three largest states, Texas, California, and Florida, representing approximately one quarter of our U.S. room count, which together improved roughly 400 basis points sequentially to up 8% RevPAR growth in Q3. We continued to see strong performance across our Midwest and industrial states, with significant growth in Iowa, up 16%, Illinois, up 15%, Ohio, up 10%, and Indiana, up 9%, highlighting a portfolio well positioned to benefit from increasing infrastructure related demand with nearly 80% of the infrastructure built yet to be deployed.

Higher midweek demand is driving much of this strength, especially at hotels and markets near major transportation, manufacturing, AI, data center, and industrial projects. As these investments continue to ramp up, they are creating a durable growth tailwind for our franchisees. October month-to-date, U.S. RevPAR has remained relatively consistent with third quarter results, reinforcing our confidence in underlying demand trends as we close out 2026. International RevPAR continued to recover, declining 3% year-over-year in constant currency in the third quarter, an improvement of nearly 400 basis points sequentially. Canada RevPAR increased 7%, supported by sustained pricing power and improving domestic demand. Southeast Asia and Pacific RevPAR increased 5%, led by Korea, Thailand, and Indonesia. Latin America RevPAR rose 2%, improving 900 basis points sequentially, driven by Mexico. EMEA RevPAR grew 2% year-over-year, driven by strong performance in Turkey, India, and Spain.

This growth represents an 800 basis point sequential improvement, which reflects a substantial recovery in Germany, where performance improved 1,100 basis points sequentially, coupled with RevPAR stabilization in the Middle East, where RevPAR improved from down 45% in Q2 to down 13% in Q3. Strength across these international markets was offset by China, where RevPAR declined 10%, as softer travel demand, most notably in Tier 2 cities, continues to pressure performance. On the development front, Wyndham's owner-first value proposition continues to drive strong openings and net room growth. We opened over 18,000 rooms in the quarter, or 3% more than we opened in the third quarter of last year.

Our development pipeline grew for the 25th consecutive quarter to a record of approximately 264,000 rooms across nearly 70 countries, with a FeePAR premium of approximately 30%, both domestically and internationally, reflecting our strategy of adding hotels in higher chain scales and in geographies and markets with stronger long-term economics. We are increasingly focused on adding higher FeePAR hotels that strengthen system quality and strategic positioning while increasing revenue potential that supports long-term fee and adjusted EBITDA growth. The termination of substandard rooms, which accounted for the majority of our rooms leaving the system this quarter, creates an opportunity to secure franchise agreements for higher quality hotels in attractive markets. In the third quarter, U.S. room openings carried a FeePAR premium of more than 45% over terminations, while international openings carried a premium of nearly 40%.

In the United States, conversion openings included the Hayes Street Hotel Nashville Downtown in the heart of Music City and The Blennerhassett, an 1889 landmark boutique hotel in downtown Parkersburg, West Virginia, both proud new members of our rapidly growing Trademark Collection by Wyndham. Since introducing Dazzler Select by Wyndham one year ago, we converted the Big Horn Lodge last month in historic downtown Moab, Utah, in the heart of Red Rock Country. It's our 14th Dazzler Select opening, validating demand for our latest brand extension and our distribution network, along with our ability to bring more high-quality independent economy hotels into the Wyndham global system. New construction openings this quarter included the La Quinta by Wyndham Roanoke, Virginia, the La Quinta by Wyndham Shonto, Arizona, the La Quinta by Wyndham Tracy, California, and the Microtel by Wyndham Nephi, Utah in the Topaz Mountain Range.

We also opened three new construction ECHO Suites, which USA Today readers recently named the number one extended stay hotel brand in the United States, including our 23rd ECHO Suites Extended Stay by Wyndham in Middleburg, outside of Jacksonville, Florida. EMEA net room growth was 13%, excluding Revo, and notable new construction openings included the Ramada Encore Kochi, our first Ramada Encore in Kerala, India, and a TRYP by Wyndham in the Netherlands, a newly renovated beachfront property in The Hague. Conversion activity was also strong in EMEA, highlighted by over a dozen new hotel additions, including the Wyndham Residences Piraeus Marina Zeas in Athens, overlooking the super yacht Zea Marina on the Aegean Sea. Latin America and the Caribbean also delivered 13% net room growth.

Notable new construction openings included the Wyndham Garden São Paulo, further strengthening our presence in one of Brazil's largest urban markets, and over two dozen conversion openings, including the Wyndham Garden Belize City Grand Resort along the Belize City riverside, featuring fine dining, a casino, pools, and fitness facilities. In Southeast Asia and the Pacific Rim, net room growth reached 10% for the second consecutive quarter. Notable new construction openings included the luxurious The Orion Kuala Lumpur, our first Registry Collection hotel in Malaysia, located in the heart of KL's premier shopping, dining, nightlife, and entertainment district. In China, our direct and overall franchising system also again delivered double-digit net room growth. We opened 16 new Days Inn hotels, bringing this former master license brand to 177 directly franchised hotels, nearly triple the size or a 17% compounded annual growth rate since 2019.

Conversion openings included the Wingate by Wyndham Furong, our 20th Wingate in Greater China, and the La Quinta Lishui, our ninth La Quinta, now open in China, and our 12th in Asia Pacific since introducing La Quinta in this part of the world. Ancillary revenues have increased 10% year-to-date. Growth has been supported by expanded strategic partnerships, ongoing technology innovations, and the continued adoption of our refreshed and award-winning suite of Wyndham Rewards credit cards. Our Wyndham Rewards Earner card has been named the number one travel and hotel credit card in the USA Today 10 Best Reader's Choice Awards for the ninth consecutive year.