Wyndham Hotels & Resorts' fourth-quarter systemwide revenue per available room was down 3 percent year over year on a constant-currency basis, the company reported, resulting in zero growth for full-year 2019 and contributing to a potential negative outlook for 2020. U.S. RevPAR also was down 3 percent for the quarter that ended Dec. 31, but full-year growth was 2 percent.
"In the U.S., industrywide supply outpaced demand for economy and midscale segments, which negatively affected occupancy," said Wyndham CFO Michele Allen in an earnings call. "Interstate, suburban and oil and gas markets, where we have an outsized portion of our portfolio, were particularly challenged in both rate and occupancy."
The company did not reveal occupancy or average daily rate data.
Internationally, the company saw RevPAR growth in Latin America, Europe and Southeast Asia regions, about a half-point decline in China and softness in Canada that mirrored the U.S., Allen said.
The number of systemwide rooms in 2019 grew 2.6 percent compared with 2018, with the U.S. up 0.8 percent and other regions up 5.6 percent. "We opened over 36,000 rooms in 2019, 10 percent more than in 2018 and introduced 11 of our 20 brands into 24 new countries and territories," said Wyndham president and CEO Geoff Ballotti, adding that the company's fastest-growing region is Southeast Asia, which grew 20 percent last year in net rooms. The global pipeline grew 7 percent year over year to 193,000 rooms, he said. Approximately 57 percent of the development pipeline is outside the U.S., and 70 percent overall is new construction. Of Wyndham's 831,000 global rooms, 61 percent are in the United States.
Net income for the quarter was $64 million, up 49 percent year over year, but for full-year 2019 it was down 3 percent to $157 million.
The Wyndham Rewards loyalty program represented a record 44 percent of U.S. occupancy and had an organic increase of 540 basis points from 2018, Ballotti said. Total members increased 2 million in the fourth quarter to more than 81 million total enrolled members.
2020 Guidance and COVID-19 Outlook
The company provided its outlook for the year, which did not take into consideration the coronavirus, or COVID-19, outbreak. Expected adjusted net income is $329 million to $339 million. Rooms are anticipated to grow between 2 percent and 4 percent, which includes a 0.7 percent negative impact from the loss of rooms that were previously covered by unprofitable hotel-management guarantees. And RevPAR is expected to fall in the range of flat to negative 2 percent in constant currency.
Regarding COVID-19, Ballotti said that China currently represents about 2 percent of adjusted EBITDA, but given lower RevPAR and a lower royalty Super 8 master license arrangement, "it is becoming a more important factor to our international direct franchising business. … The hotel closures appear to be stabilizing, and we've also seen approximately 50 hotels reopened over the past several days."
Approximately 70 percent of Wyndham's hotels in China remain closed, with the balance experiencing occupancy declines of about 75 percent. "We expect this to continue through at least the end of March," Allen said. "Hotels in Southeast Asia, particularly Korea, Singapore and Thailand, are seeing various degrees of occupancy declines."
The company expects that as the virus subsides and hotels reopen, the market will remain soft for the majority of the year as occupancy recovers over a three- to six-month period. "Given what we know today, we estimate a headwind of 200 to 400 basis points on full-year global RevPAR, and a potential adverse impact of $5 million to our first quarter adjusted EBITDA," Allen added.
Hotel openings anticipated for the first quarter are expected to be rescheduled for later in the year. Wyndham for the first quarter expects flat to negative room growth in China and global net rooms growth to pace behind the full-year outlook. "Should openings slip out of the year, we view the risk to net room growth to be approximately a half a point," Allen said. It was unclear whether the current situation will impact the company's plans to open 500 hotels in China within the next three years.
Expanding further, Allen noted that in China, a 100 basis point, or 1 percent, change in net rooms or RevPAR growth equates to approximately $250,000 in adjusted EBIDTA on a full-year basis. In Southeast Asia, a 1 percent change in net rooms or RevPAR growth equates to approximately $125,000. For comparison purposes, a 1 percent change in the U.S. in net rooms or RevPAR growth equates to approximately $4 million.
"We are providing these full-year sensitivities as a point of reference and to illustrate the relative and manageable magnitude of this issue in the context of our overall financial results," Allen said.
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