Wyndham Records Net Loss of $7M for Q4; $132M for Full Year

Wyndham Hotels & Resorts reported a net loss of $7 million and a year-over-year (YOY) global RevPAR decline of 33% for the fourth quarter of 2020, ended Dec. 31. For the full year, the company recorded a net loss of $132 million and RevPAR decline of 35% YOY.

“We generated strong adjusted EBITDA and free cash flow in the worst year our industry has ever experienced,” said Geoff Ballotti, president/CEO. “At the same time, we strengthened our portfolio with the completion of our strategic termination plan and drove sequential growth in hotel openings and our development pipeline. Our non-urban, drive-to economy and midscale hotels, combined with our ongoing investment in sales and marketing, captured rising pent-up leisure travel demand, which continued to produce sequential RevPAR improvements and domestic market share gains for our franchisees over the course of 2020.”

Q4 and Year-End Highlights:

  • Diluted loss per share for the quarter was $0.08 and adjusted diluted earnings per share was $0.07; diluted loss per share for the full-year was $1.42 and adjusted diluted earnings per share was $1.03.
  • Net loss for the quarter was $7 million and adjusted net income was $7 million; net loss for the full-year was $132 million and adjusted net income was $96 million.
  • Adjusted EBITDA was $56 million for the quarter and $327 million for the full-year.
  • Global comparable RevPAR for the quarter declined 33% year-over-year; global comparable RevPAR for the year declined 35% year-over-year.
  • System-wide rooms declined 4% year-over-year.
  • Net cash provided by operating activities for the full-year was $67 million and free cash flow was $34 million.
  • Paid quarterly cash dividend of $0.08 per share in fourth quarter, and Board of Directors recently authorized a 100% increase in the quarterly cash dividend to $0.16 per share beginning with the dividend expected to be declared in first quarter 2021.
  • Repaid all remaining revolver credit facility borrowings.

Q4 2020 Operating Results
Revenues declined from $492 million in the fourth quarter of 2019 to $296 million in the fourth quarter of 2020. The decline includes lower pass-through cost-reimbursement revenues of $70 million, which have no impact on adjusted EBITDA, in the company’s hotel management business. Excluding cost-reimbursement revenues, revenues declined $126 million primarily reflecting a 33% decline in comparable RevPAR and the impact from hotels temporarily closed due to COVID-19, as well as a $15 million decline in license and other fees also reflecting the impact of COVID-19 on travel demand globally.

The company generated a net loss of $7 million, or $0.08 per diluted share, compared to net income of $64 million, or $0.68 per diluted share, in the fourth quarter of 2019. The decrease of $71 million, or $0.76 per diluted share, was primarily due to the RevPAR and license fee declines, as well as excess marketing fund spend, which were partially offset by cost containment initiatives, lower volume-related expenses and the absence of transaction-related expenses.

Hotel Franchising
Wyndham’s franchised system declined 3% primarily reflecting its previously announced removal of approximately 18,500 non-compliant and brand detracting rooms. In addition, net franchised rooms includes approximately 7,800 rooms that were transferred from the hotel management segment primarily related to the CorePoint Lodging asset sales, which were partially offset by the deletion of approximately 5,300 low-royalty rooms in connection with the sale of certain hotels by a strategic partner.

RevPAR declined 33% globally reflecting a 28% decline in the U.S. and a 43% decline internationally. On a comparable basis, which is in constant currency and excludes hotels temporarily closed due to COVID-19, global RevPAR declined 31% reflecting a 28% decline in the U.S. and a 40% decline internationally.

Revenues decreased $98 million compared to fourth quarter 2019 reflecting the impact of COVID-19 on travel demand globally, while a decline in adjusted EBITDA of $76 million further reflected excess marketing fund spend, partially mitigated by cost containment initiatives and lower volume-related expenses.

Hotel Management
Wyndham’s managed system declined 19%, primarily reflecting approximately 7,800 rooms that were transferred to the hotel franchising segment primarily as a result of CorePoint Lodging asset sales. Excluding the transfer of these rooms, the company’s managed system decreased 7% primarily reflecting its previously announced removal of approximately 2,900 unprofitable management guarantee hotel rooms.

RevPAR declined 44% globally, domestically and internationally. On a comparable basis, which excludes hotels temporarily closed due to COVID-19, global RevPAR declined 43%, including a 44% decline in the U.S. and a 42% decline internationally.

Revenues decreased $96 million compared to the prior-year period primarily due to lower cost-reimbursement revenues, which have no impact on adjusted EBITDA. Absent cost-reimbursements, revenues decreased $26 million due to the unfavorable impact of COVID-19 on travel demand globally. Adjusted EBITDA declined $22 million as the RevPAR impacts were partially mitigated by lower volume-related expenses.

Full-Year 2020 Operating Results
Revenues declined from $2,053 million in 2019 to $1,300 million in 2020. The decline includes lower pass-through cost-reimbursement revenues of $273 million, which have no impact on adjusted EBITDA, in the company’s hotel management business. Excluding cost-reimbursement revenues, revenues declined $480 million primarily reflecting a 35% decline in comparable RevPAR and the impact from hotels temporarily closed due to COVID-19, as well as a $47 million decline in license and other fees also reflecting the impact of COVID-19 on travel demand globally.

The company generated a net loss of $132 million, or $1.42 per diluted share, in 2020 compared to net income of $157 million, or $1.62 per diluted share, in 2019. The decline of $289 million, or $3.04 per diluted share, was primarily due to the revenue decline, impact of the non-cash impairment charges and excess marketing fund spend, which were partially offset by cost containment initiatives, lower volume-related, separation-related and transaction-related expenses and the absence of contract termination expenses.

Development
As of Dec. 31, the company’s hotel system of more than 8,900 properties and approximately 796,000 rooms declined 4% year-over-year primarily reflecting unusual termination events resulting in the deletion of approximately 26,700 rooms, comprised of 18,500 non-compliant, brand detracting rooms, 5,300 rooms in connection with the strategic partner hotel sales and 2,900 unprofitable management guarantee rooms. As a result, the company’s global retention rate declined 330 basis points year-over-year to 91.5%.

Wyndham awarded more than 580 new contracts and its development pipeline at year-end consisted of approximately 1,400 hotels and approximately 185,000 rooms, growing sequentially by 120 basis points domestically and 20 basis points globally. Approximately 64% of the company’s development pipeline is international and 75% is new construction, of which 34% have broken ground.

Cash and Liquidity
During the fourth quarter of 2020, the company repaid all remaining borrowings under its revolving credit facility. Accordingly, its cash balance decreased $242 million since Sept. 30 to $493 million as of Dec. 31. It had more than $1.2 billion in total liquidity available as of Dec. 31.

The company generated $67 million of net cash provided by operating activities in 2020 and $34 million of free cash flow in 2020. Excluding $66 million of special-item cash outlays, primarily relating to the its restructuring initiatives, as well as transaction-related and separation-related cash payments, adjusted free cash flow in 2020 was $100 million.

2021 Projections
The Company is not providing a complete outlook for full-year 2021 given the RevPAR uncertainties ahead; however, provided below is its best view of certain operating statistics and financial metrics for full-year 2021:

  • Net rooms growth of 1% to 2%.
  • Every point of RevPAR change vs. 2020 is expected to generate approximately $2.5 million of adjusted EBITDA change vs. 2020. This estimate does not include impacts from license fees or the marketing funds.
  • License fees are expected to be $70 million reflecting the minimum levels outlined in the underlying agreements.
  • Marketing, reservation and loyalty expenses are not expected to exceed marketing, reservation and loyalty revenues. As such, the company expects no meaningful impact to full-year 2021 adjusted
  • EBITDA from the marketing, reservation and loyalty funds.
  • The company does not expect any meaningful special-item cash outlays in 2021.

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