Wyndham Hotels & Resorts, Inc. Price & Performance (WH)

Accordingly, we encourage investors to monitor our web site and our social media channels in addition to our press releases, filings submitted with the SEC, any public conference calls or webcast. With that, I will turn the call over to Jeff. Thanks, Matt. Good morning, everyone, and thanks for joining us today. Thrilled to report a very strong finish for the year with net room growth of 4% and comparable adjusted EBITDA and EPS growth of 710% respectively, all in line with our expectations. We opened a record 69,000 rooms, the largest number of annual organic room additions in Wyndham's history and 4% more than last year. Our global retention rate improved another 10 basis points to 95.7%, a level of franchisee engagement and satisfaction that's never been higher and a testament to the strength of our owner first value prop domestically, net rooms grew sequentially and year over year including a 4% increase in our mid scale and above brands along with half a dozen new construction La Quinta hotels, opening in growing infrastructure markets like Dallas, Austin and San Antonio, Texas. Our Echo Sweets brand opened in new markets like Nashville, Indianapolis, Madison, Wisconsin and Richmond, Virginia And as this new brand stabilizes, operating performance continues to exceed owner expectations from both the market share and an extended stay occupancy standpoint.

We also expanded our upscale extended stay segment offerings this quarter, with the launch of apartment style Wyndham Residences in Washington, D. C. And Downtown Houston, The extended stay market is predicted to grow nearly 30% from $21,000,000,000 in 2024 to $27,000,000,000 by 2028 And it's a segment with Echo Suites, Hawthorne Suites, Water Walk and Wyndham Residences that now represents nearly Wyndham third of our growing domestic development pipeline.

Internationally, we grew net rooms 2% sequentially and seven In EMEA, net rooms increased 5% with over a dozen conversion and more than half a dozen new construction hotels including our first Wyndham Garden on the Indian Subcontinent and Haryana's popular travel destination of Soniput, in the sixth most populous city in Turkey a country where we now have opened over 120 hotels.

Development momentum across EMEA remains robust with our pipeline growing 20% an average fee par 17% higher than the region's current portfolio.

In Latin America, our development pipeline grew by 15% at an average fee par 23% higher than the current system, Net rooms in the region grew by 11% including a solid mix of conversion hotels, and new construction additions like the new Wyndham Tulum located in the heart of Mexico's Yucatan Peninsula, Our Southeast Asia and Pacific Rim region grew net rooms by an impressive 16% with over half a dozen new construction openings including two in Thailand's coastal vacation destination of Pattaya, the trademark Beverly Mountain Bay Resort and the Howard Johnson's Joim Chen Beach along with the new construction trip by Wyndham Southport, overlooking Australia's Gold Coast this region's pipeline stands at over 100 hotels At a fee par, than its current portfolio. Our direct franchising system also grew 16% with over 60 openings in the quarter half of which were new conversions and half of which were new construction hotels, including the spectacular five Wyndham Quan Zhou. Our fortieth Wyndham Garden Hotel in Honjo and our ninetieth Wyndham in hotel in China the beautiful new construction Days Inn Shandu. Development activity across China set new records with 150 direct bridge pushing the region's direct franchising pipeline to nearly 400 hotels at a fee par that is 40% higher than that of our current China direct franchising system.

Over the past three years, our direct franchising system in China has grown at a 13% CAGR while our master franchisees have grown by approximately 1%. It not for the drag of these legacy master license agreements, which have a nominal impact on EBITDA, our net room growth in 2024 would have been 40 basis points higher underscoring the importance of and our focus on accelerating the growth of our direct franchising brands internationally. Where we continue to build a pipeline of higher quality hotels that deliver stronger feePAR and greater revenue potential. Looking ahead, we remain confident that our direct franchising model will be the key driver of sustainable growth across our international regions. U. S. RevPAR in the fourth quarter grew by 5.3% including a 140 basis point contribution from hurricane impacts. Excluding the hurricane lift, RevPAR improved 3.9%, which reflecting increased blue collar mid week business demand and leisure transient weekend bookings. As expected, we continue to see strong weekday performance driven by infrastructure bookings, Throughout 2024, we saw over 2,200 major infrastructure projects starts totaling nearly 1 quarter of a trillion dollars in value. With nearly 80% of these projects located near at least one and often several Wyndham branded hotels.

Wyndham franchisees in these markets experienced a RevPAR increase of more than 6% in the fourth quarter alone contributing 140 basis points to our overall Fourth Quarter U. S. RevPAR growth. The surge in data center demand in construction has become a defining trend in the digital era. And Wyndham has dozens of hotels within a 10 mile radius of the top 10 data center projects that commenced in 2024 across The United States. These hotels saw an impressive year over year Q4 RevPAR premium of nearly 500 basis points compared to the rest of our U. S. Portfolio. With about half of this market share gain coming from increased demand and the remainder resulting from improved pricing power driven by occupancy gains. Of existing and pipeline hotels that we have not only in top data centers like Silicon Valley and major metro areas like Dallas, but also in emerging data center markets like Columbus, Ohio. And Jackson, Mississippi, where our sales, development and marketing teams are focused on for increased growth opportunities. Importantly, leisure demand increased 3% over the year during the fourth quarter in non hurricane affected regions, US leisure travel intentions for the next six months have increased year over year across all income brackets according to MMG's latest survey reflecting broad based confidence in both travel and the overall economy.

And consumer trends that we're seeing remain healthy. Booking lead times lengthened this quarter by another 4% while average length of stay improved by another 2%. Driving increased spending for both Wyndham and for our franchisees. Just as our domestic business showed strong momentum, International markets were also meaningful contributor with 6% year over year RevPAR growth in constant currency. Excluding hyperinflationary Argentina, Latin America RevPAR grew by 32% with both pricing power and higher Mexico and The Caribbean.

Our EMEA region saw a 7% lift year over year led by strong performance in Spain Turkey, Austria and Greece. And our Southeast Asia and Canadian regions each posted 5% growth year over year. These gains were partially offset continued deflationary pressures in China where RevPAR declined 11%. China ADR still remains 3% ahead of 2019 while occupancy remains at 80% of pre COVID levels.

Royalty rate growth this year was strong, increasing by 10 basis points to remix the composition of our portfolio to drive higher royalty rate hotels into our system. By enhancing the value proposition and revenue contribution for our hotels, strategically expanding our brands and markets where we have scale and concentrating openings with higher fee par hotels while ex The fee par of twenty twenty four domestic openings represented a 36% premium relative to the rooms that exited the system during the year. And the fee par of twenty twenty four international openings represented a 27% premium relative to the international rooms that exited the system last year. Just as our development strategy is targeting significantly higher feePAR additions our portfolio our marketing strategy is targeting both a younger and more affluent customer.

Our teams continue to succeed in attracting more Gen Y and Gen Z guests growing by another 130 basis points versus twenty twenty three, While retaining loyalty, among retiree and older generations, Our guests' average household income of $104,000 is over 9% higher than last year with a growing share of check ins coming from higher income guests earning over $200,000 A key driver of this success is Wyndham rewards, which Membership has now reached 114,000,000 members globally, an 8% increase versus last year.

And the program's share of U. S. Occupancy increased 200 basis points in 2024 now accounting for more than one out of every two check ins domestically. Investments in AI driven technology and mobile innovation track rewards and enjoy exclusive offerings including over 300,000 experiential travel opportunities globally through partnerships with Viator, Caesars, minor league baseball and others. From on field college football game experiences to private VIP tours show tickets, cooking classes, extreme adventures and more these experiential offerings continue to cement Wyndham rewards as the industry's number one ranked loyalty program in the industry's fastest way to earn a free night. We delivered strong growth in ancillary fees throughout the year. Led by the continued expansion of our co branded credit card program, as initiatives like Wyndham Wyndham, our new guest engagement are ramping up well and are expected to contribute incrementally. The primary driver of ancillary fee growth in 2025 remains our suite of co branded card products, Just last week, we finalized a long term agreement to renew our U. S. Co branded credit card with our current provider Barclays. And as a result, through new marketing initiatives, new product opportunities, and program modernization, we expect to accelerate cardholder acquisitions and capture a greater share of member wallet.

The improved economics will begin benefiting Wyndham immediately.

We also recently finalized an agreement to launch a co branded debit card, the first of its kind in The United States hospitality sector. Collaboration with our new partner, Galileo Financial Technologies, a platform owned by SoFi this innovative product is designed to tap into the $4,500,000,000,000 debit card spending market providing our loyalty members an alternative solution to earn Wyndham Wyndham points on their every day purchases. We expect the debit card to be available within our digital ecosystem by the peak of our busy summer travel season. Before turning the call over to Michelle, we want to take a moment to express our gratitude to our team members around the world. Their hard work and their commitment to our owner first operating philosophy is critical to the success we continue to achieve. Twenty twenty four's results underscore Wyndham's ability to execute on the key pillars of our long term growth algorithm including strong development momentum, continued royalty rate expansion, sustained ancillary fee growth and increased weekend demand highlighting our growing infrastructure spend capture. Our performance represents the building blocks for sustained momentum and successful achievement of our 2025 goals and longer term growth strategy. And with that, I'll now turn the call over to Michelle.

Michelle?

Thanks, Jeff, and good morning, everyone. I'll begin my remarks today with a detailed review of our fourth quarter and full year results, followed by an update on our cash flows and balance sheet.

I'll then cover our 2025 outlook.

Before we get started, let me briefly remind everyone that the comparability of our financial results is impacted the timing of our marketing fund spend. In the fourth quarter of this year, marketing fund revenues exceeded expenses by $5,000,000 as expected compared to revenues exceeding expenses by $9,000,000 in the fourth quarter of last During full year 2024, marketing fund expenses exceeded revenues by $1,000,000 while in 2023, marketing fund revenues exceeded expenses by $9,000,000 To enhance transparency and provide a better understanding of the results of our ongoing operations, I will be highlighting our results on a comparable basis which neutralizes the Marketing Fund impact. In the fourth quarter, we generated $341,000,000 of fee related and other revenues and $168,000,000 of adjusted EBITDA. B related and other revenues increased 7% year over year reflecting higher franchise fees and broad based 3.6%, RevPAR up 2.9%, including currency effect and royalty rates improving 19 basis points globally. Adjusted EBITDA increased 12% on a comparable basis driven by our higher fee related revenues and ongoing margin expansion from operational improvements. Adjusted diluted EPS grew 18% on a comparable basis to $1.04 reflecting our adjusted EBITDA growth and our share repurchase activity partially offset by higher interest expense.

For the full year, we generated approximately $1,400,000,000 of fee related and other revenues compared to approximately $1,380,000,000 last year, which included $18,000,000 of pass through revenues from our Global Franchisee Conference conducted in 2023. Absent this impact, the increase in fee related and other revenue was driven by higher royalties and franchise fees, including net room growth and expansion of our royalty rates and we also saw ancillary revenues grow 6% this year with strong contributions from both our co branded credit card program and partnership revenue. Full year adjusted EBITDA increased 7% on a comparable basis to $694,000,000 driven by our higher fee related revenues as well as margin expansion. Our 2024 adjusted EBITDA margin improved 200 basis points with roughly three quarters of this improvement representing scale benefits and operational efficiencies expected to carry into 2025. Adjusted diluted EPS increased 10% on a comparable basis to $4.33 reflecting our EBITDA growth and share repurchase activity partially offset by higher interest expense. Adjusted free cash flow was $130,000,000 in the fourth quarter, and $397,000,000 in the full year, with a conversion rate from adjusted EBITDA of 57%. Our adjusted free cash flow yield of nearly 5% continues to be best in class within the lodging sector.

Our capital allocation strategy remains unchanged. We're prioritizing strategic investments to grow our system, whether through organic expansion or acquisitions, and we're targeting high fee part accretive properties. Our goal is to improve the per room contribution to EBITDA creating a multiplier effect that compounds over time and drive strong sustainable growth. To that end, demand for our brand is robust as reflected in the 5% increase in our pipeline Jeff shared earlier. In 2024, we strategically deployed $109,000,000 of investment advances to add new hotels to our system with a This intentional strategy is performing as planned. Over the course of 2024, we added flagship hotels in major markets, such as Miami, Seattle, Sao Paulo, Paris and Frankfurt. At the same time, we maintained a disciplined approach to capital deployment. Ensuring the deals we underwrite consistently meet our hurdle rates and generate strong returns for We returned $430,000,000 to shareholders in 2024 representing 6% of our market cap through $122,000,000 in common stock dividends and $3.00 $8,000,000 in share repurchases, at an average price of $75.63 about 30% lower than trading levels as of last Friday. Over the past five years, we have returned 30% of our market cap to our shareholders, leading all lodging C Corp in capital return.

Earlier this month, as part of our continued commitment to shareholder returns, our Board of Directors authorized an 8% increase to the quarterly cash dividend, raising it to $0.41 per share beginning with the dividend expected to be declared in the first quarter of twenty twenty five and reflecting the Board's ongoing confidence in the strength of our business model and our ability to consistently generate strong cash flows. We ended the year with approximately $765,000,000 of total liquidity and our net leverage ratio of 3.4 times remains as expected near the midpoint of our target range. Now turning to outlook. We expect our global net room growth to accelerate to a range of 3% to 4.6% in 2025. We are projecting global RevPAR growth of 2% to 3% on a constant currency basis. For those modeling in currency effects, you'll need to adjust that about 150 basis Our expectations reflect several key dynamics that are worth detailing. First, while U. S. RevPAR growth exceeded 5% in the fourth quarter, about 1.5% of that growth was driven by hurricane impacts. Which we are adjusting out of our 2025 build. Second, we expect weekdays will continue to outperform weekends driven by blue collar and infrastructure related demand in The U. S. Which should also provide a modest pricing boost.

Third, we expect leisure demand to improve this year. In 2024, we saw some leisure demand shift away from U. S. Drive to destination like National Parks and we anticipate part of that demand will return to The U. S. In the upcoming vacation season. We've already seen a meaningful improvement during the fourth quarter with leisure demand up three forty basis points excluding hurricane impacts and this trend continued into January. Taking all these factors into account, our outlook includes 150 to 200 basis points of U. S. Growth from infrastructure slightly above the 140 basis point lift seen in the fourth quarter, and then along with 50 basis points of ADR growth and another 50 basis points from that stronger leisure demand. Finally, international RevPAR growth is so the components will likely shift. We anticipate some deceleration in the EMEA growth rates after a strong 2024. While Asia Pacific is projected to accelerate as China's recovery continues. Onto the financials, which include the expected benefits from our renewed co branded credit card agreement with Barclays. Fee related and other revenues are expected to be $1,490,000,000 to $1,510,000,000 This includes approximately $15,000,000 of EBITDA neutral revenue in our marketing reservation and loyalty funds associated with our Global Franchisee Conference will be held in May of this year.

Adjusted EBITDA is expected to be between $745,000,000 and $755,000,000 reflecting year over year growth of 7% to 9%. Adjusted net income projected to be $369,000,000 to $379,000,000 and adjusted diluted EPS is projected at $4.66 to $4.78 an increase of 8% to 10% based on a diluted share count of $79,200,000 which as usual assumes no share repurchase activity or incremental interest expense associated with any potential borrowing activity. Free cash flow conversion before development advances is expected Free cash flow conversion before development advances is expected to range between 5760%. In addition to the cash we generate from operations, we also benefit from a strong balance sheet. At the midpoint, our adjusted EBITDA growth when levered will provide another $550,000,000 of available capital in 2025 to either invest in the business or to return to shareholders. We expect approximately $110,000,000 of this capital will be deployed as development advanced spend consistent with 2024. A few quick notes on seasonality. While we expect our marketing funds to breakeven on a full year basis, we will continue to see timing differences in our quarterly results. We expect the funds to unfavorably impact adjusted EBITDA comparability by $3,000,000 to $5,000,000 in both the first and second quarters and then have the reverse favorable impact on comparability in the back half of the year.

Including these timing effects, we anticipate roughly 20% of our annual adjusted EBITDA will occur in the first quarter. Finally, we continue to expect a three year adjusted EBITDA CAGR To close, we're very pleased with our 2024 results, which highlight the strength of our business model and our ability to drive meaningful growth even amidst a soft RevPAR environment for much of the year. This performance underscores the effectiveness of our strategic plan and the disciplined execution that has been critical to our success. We are confident in achieving the targets we set in late twenty twenty three with this year's results marking a strong step towards realizing that plan and laying a solid foundation for As we move into 2025, we are well positioned to accelerate growth and create lasting value for our stakeholders. With that, Jeff and I would be happy to take your questions. Operator, for questions. Just one We'll go first this morning to Brent Montour of Barclays.

Good morning, everybody. Thanks for taking my question.

I wanted to start off with a question about development. The net unit growth guidance of 4.1% at the midpoint is a sort of 50 bps lift year over year acceleration. Can you help us break that up between a lift in new construction versus a lift in conversions versus the retention improvement? And then if you could also help us understand if it's sort of pro rata similar in The U. S. Versus international?

Good morning, Grant. Thanks for the question. Sure. The net room growth guidance is has the low end anchored to our 2024 expectation to accelerate growth over this key driver in 2025? And I would say the low end is consistent production levels with 2024, so it's including a 95.7% retention rate and then gross openings of 7.9%. At the high end, I think we would be looking for retention to improve about 30 basis points and then gross opens to improve 70 basis points. So probably ending somewhere just above 8.5% closer to 9%. New construction will be a bigger portion of net room growth in 2025, particularly as ECHO continues to ramp and we should see improved results out of The U. S. Compared to 2024 and international will continue to produce at or above 2024 production. Thank you. We go next now to Michael Bellisario with Baird.

Thanks. Good morning, everyone.

Just want to stick on the developments front, but also focus on Key Money, kind of two questions here. One, are you seeing higher returns on key money investments today or has that been relatively stable recently? And then second, just in terms of the dollars that you're investing understand that it's flat year over year, but broadly speaking, are you doing more dollars in the same amount of deals or more deals with plus or minus the same amount of dollars invested? Thanks.

Good morning. Yes, so we're really excited about our P money strategy and what the teams have been able to produce with this tool. In the toolbox. The strategy is working. We're deploying more key money. And by doing that, we're attracting higher fee par properties in strategic markets, less than 20% of our additions this year have key money. And those with key money are bringing in fee par premiums of 40% compared to those without. So we're thrilled to be putting of this excess cash flow to work here. Always judicious in our use of capital and of course ensuring deals we underwrite meet our hurdle rates and that there's a healthy return for our shareholders and as interest rates continue to decline, those returns continue to improve. 25% guidance is consistent with $24,000,000 and it assumes a steady approach to capital deployment Importantly, what we are deploying is predominantly going into that mid scale and above space about, I'd say about 90% is deployed in The U. S. And the vast majority of that is for Midsky and above, and then obviously some for Echo as well.

Thank you. We go next now to Lizzie Dove with Goldman Sachs.

Hi there. Thanks for taking my question. You mentioned an interesting point about the pipeline work representing 3040% PPA premium to your current U. S. And international system respectively. You maybe talk a little bit more about to what extent is that factoring into this year's guidance? Or how soon can we start to see that flow through to your results over the next few years? Hi, Lizzie. Yes, I think I think it absolutely is part of this year's guidance when you think about RevPAR and our expectation to outperform the Wyndham, our brands typically outperform. We saw that in the economy space, 100 basis basis points in the fourth quarter. In the mid scale space, it was 300 basis points. This is not a one quarter anomaly. They consistently outperform STR and this higher fee par strategy is part of that outperformance as is kind of the brand halo and what our brands and distribution platform produce. So that is certainly a piece of what we're expecting [indiscernible] the largest impact coming from the infrastructure spend category. Thank you. We'll next now to Stephen Grambling of Morgan Stanley.

Hey, thanks. On the non room fee side, you talked about the credit card fee stream getting a step up. Should investors be thinking about that segment's growth longer term? And if I can sneak a a kind of related question in there on the debit card. Program, what percentage of your bookings are typically on debit cards?

Well, it's the first part of the question and let me start with debit card and then I'll pass it to Michelle on the credit card. Right now, it is not immaterial. Percentage that come across on the debit card. But I mean, we think that this new debit card with SoFi's technology The first of its kind in the Wyndham. I mean, why we're doing it is is really for us to provide an opportunity for credit card ineligible folks to earn Wyndham reward points, not only for hotel stays, but also for everyday purchases. It is the industry as we know, Stephen, is exploding. I mean, we're seeing it pick up nowhere near as as big a piece as our credit card. Certainly, as we attract more Gen Y and Z, they're using it more and more frequently. But we really with the rise of digital wallets like Apple Pay and Google Google Pay, it just makes these debit cards all the more appealing. For our younger our younger demographic that we've been attracting so successfully. I'll let Michelle take take the credit cards. Her team negotiated the deal. But I just start off by saying that Barclays has been an incredibly valuable partner of ours for over a decade.

And we've created with Barclays a loyalty card that's already a category killer for a preference Wyndham popularity stand USA Today readers ranked the Wyndham Wyndham credit card as the best hotel credit card for the sixth consecutive year in 2024. And this deal we believe will keep our card top of mind and top choice frequent travelers who are looking to maximize their stays through Wyndham Wyndham.

And I'll pass it over to Michelle.

Great. Thank you. Yes, we're really excited about the new credit card deal. Over the last three years, the program has grown 8% on a compounded basis. And so there's a time here to be excited about. Naturally, the deal economics are stronger, reflecting not just program growth, but also the scale of the loyalty program today as well as the potential for continued expansion in the future. We'll see digital innovation [indiscernible] purchase volumes. We'll see new products coming to market to better align with how we're growing our system footprint and meet the evolving expectations of our loyalty members today. So like I said, a lot to really be excited about. While we're restricted from giving certain competitive details as I'm sure you can appreciate. I can tell you that we do to ancillary revenue growth to be in the low teens range in 2025 up from the 6% we saw this year, and that implies about $35,000,000 of incremental revenue across all the ancillary revenue line items. That's almost double our prior expectation. And that's in part due to the early renewal of the Barclays card.

Thank you. We go next now to David Katz with Jefferies.

Good morning, everybody. My question is largely for Michelle. When we sort of look across the guidance, for '25 and then in the context of the longer term guide you gave through 2026, it it implies some acceleration from '25 into 2026. It begs the question of whether you're being a bit conservative this year And leaving a little bit of headroom or you are predicting more of a backend loaded kind of long term guide If you could help us with that Sure. Good morning, David. As I mentioned in my prepared remarks, we still feel really good about achieving that 8.5% longer term CAGR at the midpoint. So growth has already accelerated in 2024. We're up 100 basis points from what we achieved in 2023. And our outlook for 2025 does imply further acceleration. I think it's about another 130 basis points at the midpoint of the guide. So clearly, we're already seeing that trajectory. And importantly, everything we can control is performing really well. System growth, royalty rate, rate, margin, market share, all in line or better than expectation and ancillary revenue as I just mentioned, is poised to meaningfully accelerate in 2025 with the Barclays card renewal and the new debit card launching.

And so I think when we think about '26, those that momentum is what we expect to continue to build. And and it does imply a slightly higher growth rate and particularly as we move into a RevPAR growth cycle we can then compound growth on top of what we achieved in 2024.

Thank you. We go next now to Patrick Scholes of Truist Securities. Hi. Good morning, Jeff and Michelle. I may have missed this.

I may have missed this. Did you say that there were [indiscernible] impact into your RevPAR guidance for this year? We have adjusted the hurricane benefits out of our RevPAR guidance for 2025. When you say adjusted out, is that from the the 4Q that you're adjusting out for the up upcoming 4Q or there's some ongoing benefits at the moment Could you just explain that a little bit more by saying what you mean by adjusted EBITDA?

Sure. Sure. The trending, when we look at the trending that we're moving into 2025, we're looking at it excluding the hurricane benefits. So clearly in the fourth quarter, we will have an unfavorable comp because we have the 140 basis points in 2024. But when we build our 2025 guide, it includes a 30 basis point headwind for hurricanes. So the 2% to 3% in constant currency is reflective of what we will need to grow over from a hurricane perspective. Thank you. We go next now to Steve Pizzella with Deutsche Bank.

Hey, good morning, everyone. Just wanted to stick with the 8.5% adjusted EBITDA CAGR to get to 2026. What type of RevPAR environment do you need to get there next year? And do you need to see any improvement [indiscernible] And then just sticking with 2026, And following up on the credit card, I know some deals do have a step up in year two. How should we think about 2026 ancillary fees?

On the rest Par, I would say we're moving from flat last year to up about three points this year. And next year, we won three points or better. I think the math then would imply a CAGR over the three year plan of about 1% to 2% and that would include currency effects.

And with respect to the second question was Had to do with a step up in year two, which I don't think we're at liberty Michelle, to talk about in terms of the credit card fees and how to think about more generally ancillary fees going into 2026, which we feel very good about.

Yes, I think 2026 AWAY revenues were expecting to be probably in the mid teens range, so further acceleration from what we are seeing in 2025.

Okay, that makes sense. So should we think about the ancillary fees throughout the year ramping up as we progress Yes, I think on an On an economic basis, that will absolutely work. When you go to model, technique speaking, the way rev rec plays in, you may get a little bit different funky result on a quarterly basis, but economically, certainly the ramp would accelerate. Thank you. We'll go next now to Danny Asad with Bank of America.

Hi, good morning, everybody.

Jeff or Michelle, just another development question for you. Can you maybe just give us a little bit more details on kind of your in your net rooms growth outlook, how do we think about China specifically, that's kind of what's embedded in there.

And then, as higher level, but as you've been pushing into all these higher fee part rooms in your development, does your natural retention of the overall system change?

And And where should we think about that going over over the longer term?

Yes. Thanks for the question, Danny. They're both great questions. Absolutely, as we move up, you look at our pipeline, 85% of it being mid scale, upper mid scale, upscale and upper upscale. Chain scales, if just naturally if we look at 95. But we certainly have as we look in our upper upscale brands like La Quinta much higher retention rate. So that should help us from a retention rate standpoint. Moving forward. To China, we are actually heading over there tomorrow night. For another signing ceremony in our Shanghai office. We cannot express how optimistic things look over there right now on the ground for the team. They're just in continued acceleration on openings. On their executions and on all development fronts, not only in China, but across Asia Pacific, where we're heading after our Shanghai, stop over to Singapore and Thailand. Q4, we opened in China another 4,000 direct China rooms at significantly higher license fees. It was up 43% to last year. And that drove that 16% net room growth in our China direct system. And the team executed another, I think it was over another two fifty new deals, which was 30% more executions than last year.

So we're not seeing any slowdown. The new construction pipeline is incredibly robust. It's growing. 60% of the contracts awarded are new construction and we're still seeing that happen. We've got a lot of photos in our IP of just some great new construction wind and Wyndham grants that have been opening. And we're also seeing a great pickup on the conversion side. And I think where we're really making headway on our direct franchise on those same year sales, those same year opens. That continue to pick up. We had 30 direct franchise hotels open in the fourth quarter, which was roughly half of our opening. So team is feeling great. Wyndham's Wyndham resonating very well and We're looking for another good year over there. We'll next now to Dan Politzer of Wells Fargo.

Hey, good morning, everyone. Thanks for taking my question.

The royalty rates stepped up nicely in the quarter. I think in The U. S, they were up 15 basis points year over year. How best to think about that as we kind of flow through into 2025 and even into 2026, I think you guys had a target out there of that 4.40.75%.

So as we think about that getting that 8.5% EBITDA CAGR, how do you think about kind of that acceleration or or uptick in your royalty rates in the next couple of years?

Sure. I'd say we're tracking slightly ahead points this year. We had expected five So we're checking all the boxes here. We're seeing We're seeing significant impact from new development at activity. What's coming on is coming in at that 40% higher fee par premium. Part of that is showing up in the royalty rate. Today, the expectation is that we would would probably be delivering right around that same five basis points in 2025 and the same for 2026. It could be a point or two lower or higher, I 'twenty five and a point or two lower or higher in 2026. But overall, in line with the plan to deliver 15 basis points of improvement over that three year period.

You. We'll go next now to Ian Zaffino of Oppenheimer. Hey, good morning. This is Isaac Salasen on for Ian.

Thanks for taking all the questions. I just had one on Echo Suites, which looks to have gone to a nice portion of the pipeline. Are you able to provide any update on early performance of the brand? Maybe how you're seeing ADR RevPAR trends in Extended Stay compared to economy in mid scale?

Thanks, Isaac. Any of the developers that we're talking to right now who have opened Echo Suites and are operating them today would say that they're ramping faster than they anticipated. From both, to your question, an average daily rate And for them, what's really important, the extended stay occupancy standpoint, So they're ahead of schedule. We're seeing many of these fill up during the mid week and guests will check out on the weekend and they'll remain full. But just continued excitement. And those reports obviously embolden the ground breaks of those that have committed to multi unit ground breaks. And also they are sharing that that faster ramp than they anticipated with other developers. And that's been a meaningful contributor in terms of the excitement that's out there as we've executed a few more in the quarter. We executed 17 for the the full year. We now have 33,000 in the pipeline and can construction going on as we presented in our IP last night. Across some really important states for us.

Thank you. We go next now to Meredith Jensen with HSBC. [indiscernible] just touched upon this a little bit, but I was hoping you might speak more about the booking window and length of stay sort of as I see the evolution of leisure and infrastructure as well as the growth of the extended stay. And how those are kind of moving over time versus recent past where Thursday and Sunday were big days. Thanks.

Sure, Meredith. Thursday and Sundays are well ahead of where they were pre COVID, and we're continuing to see that length of stay lengthen. It was up another 140 basis points in the quarter. And so we're as Michelle said in her prepared remarks, And in an earlier question, feeling really good about that leisure demand that's out there. It continues to strengthen.

We talked about the Q4 weekend RevPAR being up excluding hurricanes three weekend demand, Thanksgiving and Christmas. Those length of stays certainly lengthen as RevPAR was up excluding hurricanes 4% and we're not seeing anything but pick up so far this year with that strength carrying into January. Our 4% excluding hurricanes.

And our January RevPAR accelerated to 6% year over year.

With economy RevPAR in January increasing over 600 basis points as our economy in midweek continues to gain share. So we're seeing a lot of pickup from infrastructure in the midweek. That's what's been driving our share gain.

And we're feeling really good so far with the February outperforming the industry by another 200 basis points for our hotels here domestically both economy and mid scale. Thank you. We go next now to Dan Waziolik of Morningstar.

Hi. Excuse me. Good morning, guys. Thanks for taking the questions. Just kind of maybe two longer term big picture questions. You're seeing a nice pickup in your infrastructure contribution. Any change to your long term fee revenue guidance from this segment? I think unless I missed it, you had talked about that in your marketing deck. And then maybe just a question on AI and how that might influence your direct in indirect distribution mix, if you have any thoughts on that? Thank you.

Sure. We've always sized this at over $3,000,000,000 revenue opportunity for our franchisees over the next decade and years.

We We're capturing an outside share of what we believe to be out there. And we're feeling really good about what's starting to happen around $50,000,000,000 or 75% of that incremental $600,000,000,000 of the spend has already been dispersed to state coffers. Meaning that these projects are being planned for, but only $100,000,000,000 has actually been spent to date meaning that it's actually been paid out. And we're seeing, as we said in our prepared remarks, the pickup There are over 68,000, I believe, infrastructure projects that have been announced to date across Just so many areas from transport to energy to broadband. We We've identified over 6,000 of those within 10 miles of markets where we have multiple Wyndham hotels. And throughout 2024, Wyndham as we said earlier, we saw over 2,200 projects start. 80% in those Wyndham markets that we referenced. And those franchisees in those markets saw that RevPAR gain of 6% in the 4Q. Driving the 140 basis points of domestic RevPAR growth that we've seen. So we're feeling good about what's happening and what we believe will to happen moving forward. In terms of In terms of AI, I mean, we because we were the first company to really move off of legacy platform native native built CRSs and PMSs.

It's enabled us over the last six years to lay down a technology stack and a foundation that is really allowing us to harness AI, we We've invested, as we've said, from 2018, up through last year over $300,000,000 We're working with best in class providers like Oracle and Sabre Amazon and Adobe and Canary.

When we talk we've been talking a lot about Wyndham Connect in terms of how it is enabling us to really innovate faster at a lower cost, allowing us to talk directly with our customers through AI, more importantly taking labor intensive tasks away from our franchisees, which they love, which is why they're they're all in. They're opting into this two thirds of our system opting into this at no cost. And in addition to that, it's really raising the service bar for our customers And it's allowing these small business owners to actually create monetization by selling early check ins and late check outs by selling room upgrades and by selling amenities before the guests get to the room. It's delivering a level of automation that don't think any of us ever before envisioned. And we're really taking the ebb and flow of those manual tasks and that customer demand away from franchisees having to staff for it.

We're automating at every customer touch point we can.

Thank you. We'll go next now to Alex Brignal of Redburn Atlantic.

All right. Thank you so much for taking the question. The pipeline that you hey, how are you doing? The pipeline evolution has obviously been incredibly strong, especially perhaps in context of some of the peers much of that growth coming from kind of bolt on deals. I wonder if you can talk about opportunities that you've seen. A lot of your growth has been organic and helped by improving retention rate. I wonder if you could talk about any opportunities the deals that might come outside of your organic activities and then let's pretend that it's related. And if you can say in terms of your owner relationships and opportunities that have risen as the sort of choice situation moves further and further in the rearview mirror?

Well, I think with that uncertainty that you referenced towards the end of the question, picture, it has allowed us to really supercharge and fuel that 200 basis points sequential, that 500 basis point year over year.

Record 250,000 rooms in our pipeline. And it's it's doing that not only domestically, but also Internationally, really strong growth organically here in The U. S. And EMEA. In Latin America, we those mid scale and above brands are what's driving it. 85% of our pipeline taking out that one brand, that economy chain scale, Echo Suites is in that mid scale, upper mid scale, upscale. Luxury segment. And 25% of our pipeline is now upscale and above. Versus roughly 12% of our system. So that move to upscale is really allowing our upper upscale brands to continue to grow.

They're often significantly underpenetrated versus some of our larger peer competitors. And when an owner plugs into the Wyndham Wyndham direct system where we may be driving over 60 or 70, and in some cases over 80% of that Wyndham Wyndham share of occupancy. And not having to share it with another Wyndham Wyndham in that market That is something very meaningful and really helps their contribution and their ROI, which is what's been so so exciting to our franchise sales teams that are actually delivering that pipeline growth.

Thank you. And that is all the time we have for questions today. Mr. Bladi, I'll turn things back to you, sir, for any closing comments. All right. Well, thanks, Bo, and thanks to all of you for your and your interest in Wyndham Hotels and Resorts. Michelle, Matt and I look forward to talking to and seeing many of you in the months ahead. At many of the upcoming investor conferences that we'll be attending. In the meantime, have a happy Valentine's Day tomorrow everybody and thanks again joining us.

Twenty twenty four Earnings Conference Call. Please disconnect your lines at this time and have a wonderful day.