Propped up by a pent-up demand to travel and propelled by growing brand conversions, Wyndham looks to be on the path to a strong recovery locally. Its only worries would be the Delta variant that could possibly reinstate travel restrictions internationally.
The demand for consumer vacation and the pent-up need to travel aided Wyndham Hotels and Resorts in maintaining its profitability for two quarters in a row amidst the lingering global pandemic.
Drive-to, leisure, and even essential business travel enabled Wyndham to show occasional flickers of profitability during the pandemic: once last year and even during the first quarter of this year amid the winter surge of new cases in the U.S.
The second quarter saw a profit of $68 million, an improvement upon the first quarter, when Wyndham reported a $24 million profit following $132 million annual loss for 2020 due to the pandemic.
In a response to when the company would be back to pre-pandemic levels, Wyndham CEO Geoff Ballotti, during an earnings call, responded, “There’s no reason in terms of 2022 that that we couldn’t be back.”
Revenue-per-available-room or RevPAR, the hotel industry’s key performance metric, increased 110 percent compared to second quarter 2020, but was down 17 percent compared to second quarter 2019. The economy brands led the recovery in the U.S. with occupancy levels consistent with 2019 levels, said Michele Allen, Wyndham’s chief financial officer.
“Domestic RevPAR for June exceeded 2019 levels,” Allen added. “And July month to date results have been even stronger, with RevPAR for our economy brands now up 12 percent over 2019 and RevPAR for our mid-scale brands now surpassing 2019 levels by 4 percent.”
In Europe, the Middle East, Eurasia and Africa region, RevPAR declined due to travel restrictions with Germany, Turkey, and India, down 68 percent and Canada declining by 48 percent.
ON THE CONVERSION FRONT
Wyndham leaders have been the most vocal about actively courting owners of existing hotels to take on a Wyndham brand affiliation — a deal known as a conversion, since the beginning of the pandemic.
The company awarded 154 new contracts this quarter compared to 116 in second quarter 2020 and 173 in second quarter 2019. Its global development pipeline consisted of over 1,400 hotels and over 190,000 rooms. It also opened 10,000 new rooms this quarter.
Wyndham has had seven hotels take on the Wyndham affiliation but largely maintaining their current boutique feel as a soft brand in an attempt to break in the luxury hotels. Having recently launched its own luxury hotel, Registry Collection Hotels, Wyndham’s more leisure-oriented portfolio is enabling it to post a profit from time to time during the pandemic.
Wyndham, which owns brands like Days Inn and La Quinta, continues to accelerate its conversion activity in Europe, Middle East, Eurasia and Africa. The company awarded 25 percent more conversion contracts than in the second quarter of 2020, and than in the first quarter of this year.
“Our team successfully executed over 90 new construction contracts in the quarter,” Ballotti said. “Twenty percent more than we awarded in 2019, bringing the total of new construction contract signed to over 390, since the onset of the global pandemic.”
Executives at the company are optimistic that the conversion rates will continue to increase and aid in its full recovery for the next year.
The search for labor recently exacerbated by the pandemic and federal benefits remains a topic for discourse at Wyndham. And Just like many in the hospitality industry, Wyndham is focusing on wooing workers through better benefits and flexibility working hours.
“Our industry needs more housekeepers,” Ballotti said. “We need more guest service agents. We need more culinary team members. And our operations support teams are working very hard in educating our owners on what they can be doing from a day daily labor monitoring basis.”
To save for additional labor costs, many of the hotel company’s large economy brands, like Howard Johnson by Wyndham and Super 8 by Wyndham hotels, are eliminating breakfast, reducing Wyndham’s economy breakfast cost for franchises by up to 50 percent.
Outlook for 2021
After having two successful quarters in a row since the pandemic, Wyndham is looking to continue to gain that growth strength for the remainder of the year.
With recovery well underway in the U.S. and China, the company projects a full year revenue of $1.16 billion to $1.19 billion and an adjusted net income of $244 million to $254 million. The hotel company also expects a 40 percent increase compared to 2020, but still a 16 percent decline compared to 2019.
“This assumes continued strong trends in the U.S. with the typical seasonal pullbacks following the peak summer season, and importantly, continued improving results overseas,” Allen said.
With a 30 percent increase of room openings compared to last quarter, Ballotti said the company is expecting to open over 50,000 rooms this year, about 80 percent of rooms opened in 2019.
“With over a third of that 50,000 rooms now achieved, we feel seasonally on pace with our historical trends,” Ballotti said.
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Photo credit: Wyndham gains profit for the second quarter in a row as travel demand increases. Tony Webster / Flickr