Skift Take

Middle-income U.S. consumers have yet to let price hikes or declining savings get in the way of booking travel. Wyndham benefited in the fourth quarter. Yet the world's largest hotel franchisor expects rate gains to plateau in 2023.

Middle-income consumers paid premiums for hotel rooms as pent-up demand and savings boosted people’s taste for travel post-pandemic. Wyndham Hotels & Resorts, the world’s largest hotel franchisor — whose brands mostly target these consumers — enjoyed quarter-after-quarter of room rate gains throughout 2022.

“By any account, it was an outstanding year for Wyndham,” said Geoff Ballotti, president and CEO, on a call with analysts on Thursday. “Our middle-class customers continue to spend more on travel than they ever have, and they are staying longer than they were back in 2019, given hybrid work environments.”

In 2022, Wyndham saw its U.S. revenue per available room — a key industry metric — rise 12 percent compared to 2019, thanks primarily to stronger pricing power. The growth was sequential over 2019’s comparable quarters. Revenue per available room up by 4 percent in the first quarter versus the pre-pandemic period, up 9 percent in the second quarter, up 10 percent in the third quarter, and up 15 percent in the fourth quarter.

In context, Wyndham’s U.S. revenue per available room at the end of 2022 was $45.96, compared with back in 2018 and 2019, when the figure hovered at $40 to $41. Occupancy is relatively lower now worldwide, while inflation has eaten away the value of dollars.

There’s still more growth to come, though it may plateau, according to Wyndham’s management. Consumers’ habits have shifted to seeking experiences, at least for now.

“[In 2023,] the U.S. is certainly going to be lower growth overall compared to international since it will be in recovery mode for sure,” said Michele Allen, chief financial officer. “Probably in the U.S., there will be a few points of occupancy growth and a few points of ADR [average daily rate] growth. Whereas internationally, we expect to see some modest ADR growth again, but a much bigger lift coming out of occupancy.”

In other words, middle-income consumers worldwide may have peaked in their willingness to keep paying ever-higher premiums for rooms. However, Wyndham can still benefit thanks to a recovery in occupancy in markets such as Asia Pacific as China’s outbound travel resumes.

Looking ahead to 2023 and a global picture, Wyndham forecasted its revenue per available room will grow by between 6 percent and 8 percent on top of the growth it has already had compared to 2019, partly reflecting general inflation.

The Parsippany, New Jersey-based hotel operator closed 2022 with nearly 9,100 hotels and 842,500 rooms spanning 24 brands, such as Super 8, Ramada, and Days Inn.

In the fourth quarter, Wyndham generated a net income of $56 million on $334 million in revenue. Net income was up 16 percent year-over-year, thanks mainly to the company collecting more fees from its franchisees. Revenue was down 15 percent year-over-year, partly reflecting the exit of the company’s select-service management business and owned hotels in the first half of 2022.

The company produced adjusted earnings before interest, taxes, depreciation, and amortization — another measure of profit — of $126 million for the quarter and $650 million for the full year.

Bleisure Trend Continues

Wyndham says its guests are now booking about two weeks ahead on average as blended business and leisure travel continues to be a phenomenon.

“Thursday and Sunday night occupancies and our guests’ average length of stays have both continued to climb in the fourth quarter versus where they were back in 2019,” Ballotti said. “All of these trends are giving our franchisees the confidence to continue to yield up in their pricing with the new revenue management tools we’re providing to them.”

“We believe that leisure travel remains the number-one priority for the discretionary consumer spend among middle-income Americans in 2023, as so many recent consumer surveys,” Ballotti said.

Tags: bleisure, blended travel, earnings, future of lodging, hotel earnings, hotel pricing, pricing, rates, wyndham

Photo credit: Exterior view of a idealization of a proposed 212-room TRYP by Wyndham Remarkables Park Queenstown, New Zealand. Source: Wyndham Worldwide.

Up Next

Loading next stories