Q1 2021 Wyndham Hotels & Resorts Inc Earnings Call
Good day and welcome to the Wyndham hotels, <unk> resorts first quarter 2021 earnings conference call.
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I would now like to turn the call over to Matt <unk> Senior Vice President of Investor Relations. Please go ahead.
Thank you operator, good morning, and thank you for joining US with me today are Jeff <unk>, our CEO and Michele Allen our CFO before we get started I want to remind you that our remarks today will contain forward looking statements. These statements are subject to risk factors that may cause our actual results to differ materially from those expressed or implied here.
Factors are discussed in detail in our most recent annual report on form 10-K filed with the Securities and Exchange Commission and any subsequent reports filed with the SEC.
We will also be referring to a number of non-GAAP measures corresponding GAAP measures and a reconciliation of non-GAAP measures to GAAP metrics are provided in our earnings release, which is available on our Investor Relations website at Investor day at Wyndham hotels Dot com.
We are providing certain measures discussing future impact on a non-GAAP basis, only because without unreasonable efforts. We are unable to provide a comparable GAAP metric.
In addition last evening, we posted an investor presentation containing supplemental information on our Investor Relations website. We may continue to provide supplemental information on our website in the future.
Accordingly, we encourage investors to monitor our website. In addition to our press releases filings submitted with the SEC and any public conference calls our webcast.
With that I'll turn the call over to Jeff.
Thanks, Matt and thanks, everyone for joining us today.
Our select service franchise business model delivered a strong start to 2021 with domestic revpar of down 25% to 2019 tracking ahead of what we estimate it internally for the first quarter.
And with consumer demand continuing to increase our Revpar has also improved significantly throughout the month of April.
Month to date, our domestic Revpar is down only 7% to 2019 with economy occupancy and Revpar now running ahead of 2019 levels.
Across all brands, we're seeing occupancies in the seventies in Florida, Arizona, and Utah and the sixties in almost a dozen other states, including California, Texas, and Georgia and in total 75% of our domestic system are in states that are at or above 50% occupancy month to date.
We're also seeing steady improvements internationally as Michele will cover later, most notably in China, where spending on travel is once again back to near pre COVID-19 levels.
Throughout the quarter, we were highly encouraged to see cancellation rates normalize our average booking windows lengthened in March website bookings surpassed 2019 booking levels.
Our confidence is back hotels are selling out again in our busy summer season is upon us.
Period over the next six months, where the U S. Travel Association is reporting net nearly nine out of every 10 American surveyed are planning to take a trip.
Adjusted EBITDA for the quarter was $97 million down, 11% to 2020 and down only 14% to 2019 free.
Free cash flow generation was equally strong with adjusted EBITDA converting at 60%.
Our operations team opened 7600 rooms, which was 23% higher than what we opened last year in the first quarter.
Conversions were strong accounting for 70% of our total openings in the quarter and despite continued travel restrictions and buy sell transaction volumes near historic lows due to ongoing lender forbearance and government stimulus our franchise sales team signed 13000, new rooms in the quarter, which was 87% of what was signed in the <unk>.
First quarter of 2019.
Our global pipeline grew sequentially for the third consecutive quarter to 187000 rooms.
Room terminations were significantly below prior year, and more importantly, 34% lower than what they were in the first quarter of 2019.
Foreclosures remained at around one half of 1% of our domestic system and.
And we successfully entered into agreements with Servicers for 26 of the 31 domestic hotels and foreclosure at the end of the quarter.
As our net rooms growth for the full year tracked on pace with expectations.
Owners in the select service segments of this industry are recognizing the power of our brand according to STR in 2019.
Occupancies for branded hotels in our core segments, where 300 basis points higher than non branded hotels.
And costs were 500 basis points lower.
In 2020 S. T R highlights that economy branded hotels outperformed independent hotels by 1300 basis points.
Mid scale branded hotels outperformed independent hotels by 500 basis points and so our teams are finding that prospective new franchisees are looking for immediately recognizable brands like ours in the economy and Midscale space.
Brands that can provide strong central system contribution at a lower distribution cost.
Over the past several years and no more so than in 2020.
We've tailored our brands offerings to fit guests' evolving needs, which when combined with our powerful sales marketing loyalty and distribution platform.
Helped our franchisees gained market share versus their S. T. Our comp sets of 350 basis points in 2020.
Followed by another 400 basis points this quarter.
A few examples of recent independent conversion activity. This quarter include the award winning in LEED certified Viana Hotel and Spa by trademark located on long Island.
Minutes away from Beth Page Golf course, and Jones Beach.
In the heart of the European Union, The Hotel Avenue, Louise Brussels became our 50th European conversion to the trademark brand.
And in the Caribbean, We converted the award winning <unk> Aqua resort in Curacao, along with a Turtle Island Beach resort and believe.
Both to trademark collection hotels by Wyndham.
On the Wyndham conversion front and the newest boomtown on Colorado's front range in Morgantown, West, Virginia as epicentre of history.
We converted the origin Westminster hotels, the hotel Morgantown, two highly rated lifestyle hotels to our growing upscale Wyndham brand as part of a nine hotel package deal with a thrash group of Mississippi.
We have another four hotels to convert to the Wyndham brand in Austin, Tupelo, Mobile and Kansas City later this year and next.
And internationally, we converted the beautiful five star hotel in the heart of downtown Shenyang, Hainan Province, China to a full service Wyndham.
In addition to our team's ability to convert 52 hotels to Wyndham brands in the quarter. We saw 17 hotels under construction in the fourth quarter progressed to opening including our fifth new construction microtel to open in China, Tianjin, which was also the first of seven Newbuild Microtel hotels, our China team expects to open this year.
Bringing our microtel by Wyndham brand.
211 direct franchise hotels in total in a country, where we introduced the brand only two short years ago.
We also opened the very first new construction Moda prototype in Canada, the microtel and in suites, Quebec across from the tourist center on scenic Lake measure antique debt.
For interest and demand for our Newbuild Microtel Moda prototypes is thriving and our franchise sales teams ability to penetrate high barrier markets like Phoenix, Newark, Kansas City, Missouri.
In Raleigh, North Carolina, which are just four of the over 100 micro tells now under development in our pipeline.
Stems from microtel, highly efficient design, which requires less land to construct and where 70% of the buildout is rentable square footage versus about 60% for its peers.
Microtel has become one of our most popular new construction prototypes to sell throughout this pandemic to developers who believe that now is the time to be building at a significantly lower cost per key for a brand that drove our full year 2019, Revpar index of over 115%.
On an overall basis, our development pipeline grew 120 basis points sequentially.
We signed 112, new hotel agreements in the quarter, representing 90% of 2019 signings.
The domestic pipeline improved 70 basis points, reflecting both conversion and new construction growth and internationally. The pipeline increased 150 basis points sequentially, primarily reflecting continued interest in new construction overseas.
Our China pipeline at over 62000 rooms is almost entirely direct franchise and it now sits with 20% more rooms in it than it did a year ago.
Our Shanghai based development team's ability to execute and opened nine of the 18 available direct franchise brands that we've so far selectively decided to sell in China has shifted our concentration.
From a primarily all master license country.
Over one third of the China room mix now being direct franchise agreements, where we are receiving 100% other royalty fees.
Moreover, our China team's ability to open 40 full service five star Wyndham and Wyndham Grand hotels in key capital cities and provinces is a strong Testament to Wyndham is growing brand recognition and franchise sales efforts has over 1400, China hotels are now sold under our by Wyndham umbrella branding.
Our entire organization remains focused on doing everything we possibly can to help restore owner profitability to pre COVID-19 levels.
Earlier this month based on extensive feedback from our franchise Advisory Council, our owners and our guests we expanded our industry, leading relief measures by reducing breakfast brand requirements for our economy hotels.
These changes are designed to help franchisees lower operational costs, while maintaining guest satisfaction and we believe that they are the most significant breakfast relief measures taken by a major hotel company to date.
The overall feedback and the engagement from our owner community since the announcement has been positive.
Okay.
We continue to advance our ESG efforts and just yesterday, we published our 2021 ESG report, which is now posted on our corporate and investor relation web sites.
This report highlights our commitment to operating our business in a way that is socially ethically and environmentally responsible. Their report also includes enhanced disclosures around data privacy cyber security water conservation and biodiversity and it's based on the sustainable accounting Board standard for hotels, and lodging and the task force on climate related financial.
<unk> disclosures.
The report also feature some of the very important work. Our teams are doing in response to COVID-19, ensuring the health and safety of our guests and team members and providing continued support to our franchisees, while helping them become certified in our Wyndham Green program.
Our quality scores as ranked by ISS are now two out of 10 on governance.
Out of 10 on environment and a best in class one out of 10 on social.
We've intensified our diversity equity and inclusion efforts as we cultivate a workplace that supports the open dialogue that makes Wyndham hotels and resorts such a great place to work with.
We've earned a perfect 100% score on the human rights campaign's LGBTQ equality index for three consecutive years and we've achieved an a minus rating on the carbon disclosure CDP report for the second year in a row.
We are thrilled with the recent upturn in demand.
With what our teams around the world are achieved and with how we currently see the busy summer season ahead shaping up.
And with that I'll turn the call over to Michelle Michelle.
Thanks, Jeff Good morning, everyone I'll begin my remarks today with a detailed review of our first quarter results followed by an update on our capital allocation strategy and a brief note on outlook.
Throughout my discussion today I'll provide comparisons not only to prior year, but also to 2019, which we believe are more meaningful as prior year results were already impacted by COVID-19 related travel restrictions and therefore are a little help in analyzing recent trends and recovery prospects.
Our first quarter results continued to demonstrate the resiliency of our business model and the strength of our brands.
Generated $303 million of revenue a year over year decrease of 18% when excluding cost reimbursement revenues or 26% versus 2019. The majority of this decrease was driven by a global revpar decline as well as outsized revpar effects from our two owned hotels and lower license fees from travel and leisure.
Sure.
For 2019, Revpar was down 31% globally, 25% domestically and 45% internationally on a constant currency basis.
The domestic revpar decline of 25% represents an improvement from down 31% in the fourth quarter, which was driven by both strong occupancy and stronger ADR.
This is exactly what we want to see our own are successfully pushing rate when occupancy provides the opportunity.
As Jeff mentioned, our economy brands are leading the recovery with 2021, Revpar now, surpassing 2019 levels and our mid scale brands are fast followers with 2021 worth par now within about 10% of 2019 levels.
45% decline internationally was in line with fourth quarter performance, Despite China occupancy softening to 40% as a result of regional Lockdowns. This was more than offset by favorable occupancy trends in other international regions due to the relaxation of some local restrictions.
We're encouraged by the recent trends in China, where April month to date occupancy levels are now averaging about 10% below 2019 levels.
Adjusted EBITDA was $97 million from the first quarter down only 11% versus a year ago and 14% versus 2019 as the revenue declines were substantially offset by reduced costs due to our COVID-19 mitigation plan implemented last April and lower volume related expenses.
Fortunately, our adjusted EBITDA margin and our franchising margin each improved approximately 600 basis points compared with 2019, our adjusted EBITDA margin increased to 42%, reflecting not only the COVID-19 cost savings, but also less excess marketing spend in the quarter. This year, our franchising margin calculated on this.
Same basis, as our peers, which excludes the effects of our marketing plans increased to 81% benefiting predominantly from our COVID-19 cost mitigation plan.
Adjusted diluted earnings per share declined to 36 cents down 28% year over year or 31% compared to 2019 due to elevated interest expense associated with a higher overall debt balance as well as a higher tax rate primarily due to the noncash remeasurement of net deferred tax liabilities caused by state tax rate.
Changes.
Free cash flow for the quarter was $59 million compared to $10 million in the first quarter of 2020, an increase of almost six fold and compare to a cash use of $2 million in the first quarter of 2019.
You'll recall that both of the prior year periods included special item cash outlays, even after normalizing for those amounts we double free cash flow over both periods due to strong collections and working capital management.
We ended the quarter with nearly one 3 billion of liquidity and our first lien net leverage ratio was three four times well below the five times limit.
On April 15th we redeemed 500 million of unsecured notes, reducing our annual cash interest expense by approximately $27 million.
This impact will be somewhat muted in 2021 by the $13 million call premium we paid as well as the partial year of the debt was outstanding there was little impact on our net debt position as we primarily used available cash to redeem the notes.
Coupled with the issuance of our four and three eighths notes back in August of 2020. This redemption effectively returns our liquidity profile and debt structure to pre pandemic levels, while extending $500 million maturity by approximately two and a half years at a 100 basis point lower interest rate post redemption, our liquidity stands at approximately 700.
$50 million.
Our capital allocation philosophy today remains consistent with what it was pre COVID-19.
Our first preference is to always invest in that business for future growth.
M&A activity has been limited due to bid ask disparities, but with increasing optimism around recovery. We expect there could be a more active market on the horizon, we will be strategic and methodical in sourcing and evaluating deals and continue to look for valuation creation opportunities.
We came into this pandemic with a target leverage range of three to four times and a preference to be in the lower half of that range.
After thorough analysis, we continue to believe this is the right goal for our business.
This range affords us tremendous optionality, while providing plentiful access to affordable that we expect to get back within this range primarily through EBIT generation as we approach 2022.
We continue to be a regular dividend payer not only where we the only lodging C corp to maintain and meaningful dividend throughout the pandemic. We were also able to double last year's dividend in the first quarter of this year further demonstrating managements and our board's commitment to shareholder return.
We target a dividend payout ratio in the low to mid thirties, which would put the dividend growth rate generally in line with our annual earnings growth rate.
Any excess cash will then be allocated to share repurchases.
Moving now to outlook.
We go ever more confident each passing day with increasing vaccination percentages and recent occupancy trends. There are still uncertainties ahead, and we are therefore, not yet providing a full outlook for 2021, However, I do want to provide a few updates to the projections we provided on February call.
Our full year net room growth target remains consistent with our previous projection of 1% to 2%.
We are updating our revpar sensitivity from two and a half million per point of Revpar to $2 8 million per point to reflect better than expected results at our two owned hotels and to remove the conservatism embedded in February estimate given Q1 and April to date performance.
At this time, we continue to project license fees of $70 million, we note travel and leisure gross VOI sales would need to reach $1 $6 billion before exceeding the contractual minimum piece.
Continue to expect our marketing funds to breakeven in 2021 and interest expense is now expected to be 94 million to $96 million, reflecting the savings achieved in connection with our recent redemption of the 2026 notes.
There are no other changes to the projections previously provided in February.
In closing our first quarter results were better than we expected with revpar in the U S. Leading the way 2020 is in the rearview. If there was a silver lining it was the unique opportunity it provided us to showcase the advantages of the select service space the strength of our brands and that Wyndham is resilient and built to perform well in both up cycles and <unk>.
Cycles, our focus today is on the future I'm driving profitability for our franchisees and on creating even greater value for our shareholders with that Jeff and I would be happy to take your questions operator.
No debt at this time, if you have a question or comment. Please press Star then one on your Touchtone phone.
If at any point. Your question has been answered you may remove yourself from the queue by pressing the pound key we do ask that you limit yourself to one question and one follow up thank you.
We'll take our first question today from Joe Greff with J P. Morgan. Please go ahead.
Hey, good morning, guys.
Good morning, Jeff.
My first question is on the renewables slash retention.
The churn was better than the first quarter and so specific to the first quarter, but is that that lower removal is a function of progress in your in your March to get to 96% retention or is it really a function.
On how the timing between quarters and in 'twenty, one and as you think about your views on <unk>.
Retention and churn relative to three months ago are you more favorable.
I think it's both Joe terminations, certainly have some seasonality to them in Q1 is normally our lowest termination period. So.
Yes, we do believe that Annualizing. Our Q1 rate is is we would be at 97% I think it is getting a bit ahead of ourselves for the full year, but you know that said, where we're very happy with the progress we've been making in retaining our most valuable franchisees in it.
It gives us great confidence in getting back to that 95% level, we're not seeing anything out of the ordinary right now foreclosures are still.
As you and I've talked about less than half of 1% of our system and we were really pleased to see the terms.
Improved not just to prior year, but 2019 levels in fact, they were down more to 2019 than they were to to prior year end.
You know to the back part of your question, we've been making significant progress obviously with the with everything that we've been talking about over the last few quarters in terms of moving our termination rates from from 92% to 93%, 94% 95 and in 2019.
And look of course, our teams out there still believe we could we could do better we achieved a 96% retention for our big days Inn Super eight brands back in 2019, and we've got plenty of brands like microtel that run higher retention rates at 97 or La Quinta.
Which has been running it at 90, 98%. So you know we're focused on getting back to that 95%. This year and then and then moving up to 96 overtime.
Great. Thank you and then.
A follow up question, probably for Michelle or for anybody.
With regards to your Revpar sensitivity. The one percentage point is $2 8 million per annum or 700000 per quarter on average.
How does that how do you think about that revpar sensitivity across the <unk> and through the <unk>.
Okay.
I got I think good morning, Joe.
I think it's a I wouldn't.
I wouldn't think it would be too far different across the across the quarters I think you could you.
You could pretty much straight line it without significant variance there at the third quarter is obviously, our largest earnings quarter, but but it's not going to be very meaningful to your overall model.
And then just one final ticket type question, you the $49 million related to.
The absence of marketing funds spend.
How does that.
How do you see that allocate through the balance of the year, how much of that was realized in the first quarter.
Yeah.
The marketing fund was I believe it over spent about.
$5 million it was favorable $5 million year over year in the first quarter.
So five of the 49 was realized in Q1.
Got it and then for the balance of the year or is it relatively even or is it more heavily weighted to the summer months Oh, yeah. It would not be even at all it would be definitely more heavily weighted I believe in the second and.
And and Q Q4 for sure.
Got it thanks, guys good job.
Thank you.
Our next question is from David Katz with Jefferies. Please go ahead.
Hi, good morning, everyone.
The the among the more prevalent topics for for us and across the industry is really you know conversions and conversion sales.
I'd Love just a little more color on just how competitive that is.
How optimistic.
You are for it and its ability to drive accelerating nug as we go forward.
Sure. It's it's absolutely competitive you hear all of our peers talking about it on each of their calls David.
There were thrilled and seeing.
Our conversion activity continue to pick up and it picked up as we expected it to be and we talked about on the last call. It moved from the mid Seventy's to over 90% of our room openings domestically and we were really pleased to open more rooms domestically this year than last year.
And it moved from from the mid thirties internationally to over 50%.
Of our opens internationally. So our international teams are actually seeing it too in terms of just how strong.
Our value proposition is right now the independent hotels in terms of you know where we're at where our teams are focused on.
In Asia Pacific They are seeing it in Europe, they are seeing it.
Conversion rooms doubled for example in China, and they were higher across the board.
Internationally. So look all our all of our teams are very focused on driving the number we did not cut back on any of our franchise sales teams throughout this pandemic. Our leaders there did a great job not only keeping them in place, but giving them more resources and more support where we're deploying existing sellers to our conversion brands.
And we saw that in our our conversion pipeline our conversion pipeline grew both domestically and internationally sequentially.
We're seeing great interest domestically in our travelodge and our days Inn brands.
And in overseas, we're seeing good interest in our Armada, and especially our Wyndham brands and I think the opportunity. The last part of your question is it's it's you need franchise sales teams in place and we have those.
Teams in place and when you look at the size of the independent market with 100000 independent hotels out there that report to Smith travel.
We've we're looking at most of those independent hotels in the segments. We plan them 45000 of those 100000 independents are in the economy for example in 'twenty.
25000 are in the mid scale. So we're really optimistic and really pleased with the progress.
Alright, Thank you and just as a follow up.
Michel I look I think one of the.
Concerns we have as we sit down to focus on models just given how strong things are strongly things have accelerated help us not get too carried away.
With the remainder of the year.
You know, maybe just give us a couple of balanced thoughts on how we should look at our models.
For the back half okay.
I'm happy to do that David.
I. Thank God I think one when we think about when we think about the back half of the year, we feel really confident in our ability to predict the select service segment and and and the trends that we're seeing for select service, we still feel as if there is there's a great degree.
Variability and the full service end to end in the international markets.
And there they are quite temporary pepper mental so while I'm, while we're really encouraged by what we're seeing in China, what we want to be what we want to be.
I would say more confident and is the ability to to see a sustained recovery without further interruption and so so that's something that we're certainly looking forward to them I think there is plenty of upside to the back half of the year, but nothing that we would be willing to commit to.
Until until we start seeing a little bit more I'm, a little bit more consistency and in the full service and international performance.
Great perfect. Thanks Congrats.
Thank you.
Next question from Patrick Scholes with Truth Securities. Please go ahead.
Great. Good morning, everyone. Thank you.
Can you give us a little bit of color on your expectations, how debt net 1% to 2% unit growth will ramp as the year progresses. Thank you.
Sure.
With Q1 openings in terms and executions openings, where were 30% higher terms are down are we we are where we're looking for I.
I think the easiest way to to to look at it as debt.
We're assuming we could open and we said this on the last call 80% of what we opened in 2019, which would be.
80% of 65000 rooms, approximately 50000 rooms and.
That as we've said our rooms ramp we opened roughly 15% of those in the first quarter, which was five points more than we did percentage wise back in the first quarter of 2019, when we were growing net rooms it at 3%.
Openings are always back half loaded in and we will continue to ramp and retention is tracking them right now on or slightly above that 95%. We're looking for.
So I think from Q1 Q2, we're going to see that growth coming as we saw in the first quarter.
From from International and then were expecting domestic net rooms to begin to contribute in the.
And in the back half of the year, Q3, and especially Q4.
Yeah.
Okay, great. Thank you.
Thanks, Patrick.
Next question is from Stephen Grambling with Goldman Sachs. Please go ahead.
Hey, good morning.
Good morning, Good morning, Stephen just as a good morning as a follow up on the 2021 projections Insensitivities last quarter in the deck. I think you had some potential areas of upside that were unrelated to revpar such as license fees owned hotels ancillary fees and bad debt expense so any.
Color you can provide and thinking about what will drive the sensitivity of these other areas of upside.
Arent Revpar related.
Yes.
So we have the same slide in the deck. This this quarter slide 34, and and I would say.
As far as the license fees.
I don't see that as being likely upside the right now based upon the guidance that travel on leisure gave for Q2 and and their Q1 performance.
We think we think they would have to see a significant increase in the second half to to reach the one $6 billion, so that would be necessary for them to exceed the contractual minimum fees that we are projecting for <unk> for the full year. So we don't see that as being material upside.
For the year for us and we do see upside, though potentially to the owned hotels and we did embed that in our $2 8 million dollar revpar since sensitivity, which is how we increased the part of the reason why we increased from $2 5 million from February to $2 8 million now and.
And I would say we were quite pleased with the owned hotel performance. It was a bright spot and in first quarter and then even through April we saw we saw both our Puerto Rico Hotel, and our and our Orlando Hotel performed better than expected and so we took up our expectations for both.
Those hotels, and we think that there could be even some more upside beyond what is.
What is currently in our expectations, depending upon how depending upon how recovery progresses and so so that's potential upside.
Other the other two areas, our ancillary fees and and bad debt and so while we believe we have a reasonable forecast for both of those right now they're they're both a little outside of our control and dependent on a franchisee behavior and so there could be upside to those we're not banking on it but.
That's certainly something that we're watching and continue our continue to adjusted our forecast when and if we see trends that would indicate favorability.
And then an unrelated follow up everyone's been focused obviously on the path to recovery, but even before the pandemic I know you had implemented a number of company specific initiatives, including leveraging our relationship with in parity in your loyalty program can you just remind us of.
What was implemented where we are in that and leveraging.
Those initiatives and how that might position the business for growth beyond just a recovery.
Sure Yeah, I mean, we think it's been a big piece Stephen of our of our share gains this year, I mean and positions us very well for recovery, we've talked about before our four big initiatives or our new customer data platform, which as you referenced was the in parity a partnership we had what we did with our sales force in terms of automating all of our franchisees workflow.
And in improving our franchise sales teams to us which was really important what we've done on the mobile booking app, which again, we think is the fastest three step mobile booking app, which will.
Tell other grambling when they're driving down the road, where our nearest hotel is to pull over to and check into them and it is a it's been just huge for us its a its bookings year to date versus 19 are up 50% and we're really really pleased to see that and then I think the biggest thing for us longer term is what we've been doing.
On the on the business side in our business travelers is as we've talked about a lot is a is a segment that has been giving our franchisees and owners a lot more share in that.
Everything that we're working on from a direct billing solution. It is it is now betting benefiting all of our negotiated accounts and franchisees and our ability to attract new accounts and gain more traction from each accounts is is that that percentage of our business that really allowed our hotels to stay open and never closed.
Continues to pick up I mean, there is no better proxy for us than what what happened in January and February in the quarter with our mid week, our rates and our midweek occupancies, which outperformed the weekends when there wasn't a lot of leisure demand out there.
And what was down 20% to a prior year in Q4 that business segment for us, which again is 30% of our of our.
Of our occupancy for our hotels improved it down less than 10% in the first quarter.
Our infrastructure and construction business is now nearly flat to last year and in the second largest segment in that in that business mix for US is is what we talked about in the IP that we put out last night, that's our logistics business. That's our trucking in our transportation business, which is actually running ahead, it's 6% ahead of last year or so.
All of those initiatives, we think are allowing or our global sales teams our field sellers to go out and find new new accounts to.
To sign with Us, which again gets back to what what has been outsized share gains we feel for our brands throughout the pandemic.
That's great color. Thanks, so much.
Thanks.
Yeah.
Our next question is from Danny Assad with Bank of America. Please go ahead.
Hi, good morning, everybody.
My question is more my first one is is it more on like the more recent trends. So just the sequential acceleration from March to April it's pretty significant here. So.
You just have a sense for how much of that is due to calendar shifts spring breaks and so on and how sustainable that you know that revpar acceleration is as we progressed further into the year.
Sure. Thanks for the question Danny It. It certainly you had a lot to do obviously with spring break being sooner and.
No, we're seeing above peak level, occupancies and rates in states like Florida and in resorts and hotels like the Wyndham Grand Clearwater Beach, which was which was selling out at higher average daily rates than it did back in during that period and 19.
But in.
In terms of the demand that's out there in terms of the recent optimism in terms of the global anxiety, just continuing to fall.
And and our our booking windows lengthening our average length of stays lengthening I mean, it would suggest to US continued pick up through the spring and summer months.
And then we will be looking for that continued business travel.
Segment that we continue to see pick up.
You know continue to help our our hotels gained share.
Yeah.
Got it and then my follow up is a little bit more on the development side.
Do you have a sense for how much inflation is changing new construction unit economics and.
What are you hearing from your developers in terms of timelines and deliveries and so on.
Michel and I have been.
Traveling quite a bit the last the last few weeks and.
We're actually leaving this afternoon, we're heading down to to Florida, and what we're hearing from our developers and I think we'll continue to here today.
Is that they are beginning to experience.
Some delays when it comes to.
Deliveries, especially in the sourcing side on the <unk> side I mean, we've all been following.
What's going on with lumber.
And what we're hearing is is how that relates to a late.
Beds, because box springs aren't alright.
Arriving on time are late fixtures and furniture and equipment that has to do with lumber, which sanguine strategy.
A two by four of late knows that that's tough to do and it's twice as expensive but.
In terms of the overall you know 12 to 18 months that we've talked about from from a development standpoint, you know it is.
More after permitting is probably more towards the 18 now than it was towards the 12th but you know I think our franchisees are hopeful.
And most economics are.
Every day.
Economist I read as is of the belief that with with the easing of quantitative measures.
Mills are going to return to normal capacity and the production will will soon.
Return to normal and in delivery will pick back up.
But in terms of developer in those with those those franchisees of ours with cash or are looking for new sites.
And are looking for for new construction and that's what we've been seeing in the pipeline.
Of our new construction microtel motive and <unk>, which we continue to open.
Thank you very much.
Thanks, Dan.
And our next question is from Ian Zaffino with Oppenheimer. Please go ahead.
Hi, great. Thank you.
Can you just maybe talk about some of your discussions with your franchisees.
What's your thinking on the labor side as far as availability.
Housekeepers et cetera.
Has that been a headwind so far to the kind of increased occupancy. That's the thing we should expect going forward.
And any kind of color on that or and also sort of the franchisees.
You know what other steps you're going to do to mitigate that as is that taking a higher ADR et cetera, just some color there. Thanks.
Sure. It's in it is a great question and it's I think if you were to ask chip Rogers, our CEO at the American Hotel and Lodging Association, who has had all of US all the leadership on a call.
Several calls last week and this week it is the number one issue.
Right now that's out there.
Labor has always been an issue long before this pandemic began I mean, we've always known that the hotel industry employs 10 million people and that before we went into COVID-19 that we were struggling to fill a million jobs and certainly with the pandemic on unemployment insurance. It's an issue our industry is very very focused on it.
It's especially concerning in urban and group and meeting and full service destination hotels, I mean, we need more housekeepers.
That's what we're hearing and that's you know, that's what Michel and I see when we travel.
We need more front desk workers, we need more culinary workers.
And what what the hotel industry is doing to your to your question is is advocating on on so many different fronts slot last Tuesday, the administration approved and.
An additional 22000, H <unk> visa applicants and that's allowing our 66000 normal temporary foreign workers to grow to 88000, but it's a drop in the bucket and we need more.
We're asking the administration for the travel ban to be lifted for all J one foreign students. That's another 300000.
Let's see the HLA is launching I know accustom portal to attract a.
The young opportunity youth from across the United States of America debt, especially in the downtown areas and getting the word out in terms of what a great great industry, we have.
It is much less of an issue in the select service space for a company like ours. We don't have the outlets. We don't have the restaurants, we don't other banquet and catering facilities, but it's certainly top of mind for our for our ownership and it. It. It was a large part of what in terms of what we're doing what led to our new breakfast standards that we put.
You may have seen this week.
For our economy hotels to really reduce the labor and the E. F. T requirements for our owners are everybody's focus right now and getting our franchisees and our owners back to now that theyre getting back to the to the occupancy levels back to the profitability levels that they had in 2019.
Okay, great and maybe a little bit far out here, but you know if we get an infrastructure bill.
How do we think about how that flows through to get to each of your segments I mean I'd imagine.
Select service would do the best.
And as you kind of go up that day when it does it as much but.
What kind of your thoughts there and.
Yes.
We expect the brands to sort of operate and benefit from something like that thanks.
Sure I mean, it's we're really excited whatever shape the country's infrastructure plans might take our teams are working on trying to find new infrastructure accounts I mean, so many of of the targeted we call them pick and shovel.
Our infrastructure.
Companies that are out there that we'd expect to benefit are already customers of ours.
We're certainly talking to them about what Stephen asked about all of our new.
Wyndham business products, and our direct billing capabilities in and I mean, these are the folks that stay in our hotels, we're seeing great success at winning more bids and gaining more share as I said a minute ago.
Our Wyndham direct which was launched.
In the middle of last year has produced 50% more business than in the first quarter.
Sequentially than it did in in the fourth and so look we're looking at it you know who's building roads and bridges and the power companies in the computer companies in the broadband companies and and we're going after them and we think that.
You know that can bind <unk>.
Infrastructure and construction to your question is is about 60% of that 30% mix and again, it's nearly flat to where it was last year at down 2%.
We're looking at that and we're also looking at debt.
Logistics business, which we also think with the U S manufacturing segment index at a 37 year high we think that's a.
You know, that's a big opportunity for us as well and we're really focused on winning that business.
Yeah.
Okay, great. Thank you very much.
Thank you.
And our next question from Michael Bellisario with Baird. Please go ahead.
Good morning, everyone.
Morning, Mike.
Just bigger picture topic here from me I wanted to circle back to the P&L transaction I'm interested to hear your view on maybe how you think this deal improves your overall Grand class form what it means from a growth perspective, and then if there's any longer term financial benefit that you guys might receive as a result of the deal.
Any comments there would be helpful.
Yeah look we're we're thrilled with the with.
Thought it was a just a brilliant move on our Wyndham destinations apart from.
From a rebranding standpoint, it is a it is a great brand.
Our our blue thread sales a few where.
Following yesterday essentially when you look at sales have doubled year on year from 7% to 14%. We're incentivized on that on those new owner sales and we're doing everything we possibly can to and there are so many new initiatives. Our two teams are working on to continue to drive them.
New owner sales for travel and leisure, we think Theres a lot more we could do together on the call Center marketing front on the CMP lobby marketing, there's a lot of our franchisees. It would love love the opportunity to have a TMA will take over there are there their front desk for me from a from a concierge standpoint and provide a there.
<unk> with services.
And and the Blue thread transactions increased as Mike Brown said yesterday, and it's called 200 basis points to 9% of their transactions.
There, there's really no change to the timeshare sales strategy or the timeshare Wyndham branding that we use from a redemption standpoint it offers us.
Our Wyndham rewards.
Program, just continues to strengthen with with with all of the great <unk>.
Additions that are coming into the travel and leisure world and and so we're.
We're very very optimistic about about the future and our teams are working really well together Michelle did you want to add anything to that.
No no no structural changes to the contract.
So our ability to earn a licensee.
Got it understood. Thank you.
Thanks, Mike.
And our final question today comes from Alton Stump with Longbow Research. Please go ahead.
Great. Thank you and good morning, I just wanted to ask quickly back on the company owned hotels.
Doing better than you had expected Michelle in the first quarter you know its one of the key drivers of that and is that sustainable or do you think over the rest of the year.
Yes. Thank you.
So so actually at our Puerto Rico hotels. The hotel has benefited from increased air travel and then the island had eased a bunch of other restrictions. So they saw better leisure performance than we had initially expected and then once the guests were on property they were confined and and we felt that.
Our on property spend and some of the outlets the F&B outlets at the Spa things like things like that and so they they had a really great first quarter at the Bonnet Creek hotel in Orlando, It's all about rate at what they were able to do was the plant to be higher a higher rated group business that they typically will get in the first quarter.
With the same rate at leisure business, and so they've really great really great job by by the team there for both hotels are they typically earn about 75% of their EBITDA in the first half of the year. So so there is there's a there's a little bit of upside potentially in the back half of the year, but I would say I would say more limited.
Other than than first half.
Great color and then one quick.
On the labor from which is certainly a big issue you know across the hospitality industry.
Uh huh.
Your thoughts or expenses, you thought that once you start to see unemployment assurance.
Is that kind of you know hopefully drives up at least you know as economy starts to get back on its putting debt will probably drive up is as you move into the back half of the year. So should that help the labor front or is your expectation that we're going to continue to see the current tight environment over the rest of the year.
Yeah, I mean, I think franchisees expectation alternatives that it absolutely should help in September when it goes away, but I can't predict you know what else is out there on the horizon from from stimulus.
Yeah.
Got it makes sense. Thanks, so much.
Thanks, Thank you.
And it appears we have no further questions I'll return, the Florida, Jeff <unk> for any closing remarks alright.
Alright, well, thank you very much Keith and thank you everybody for your continued interest in Wyndham hotels, and resorts Michele Matt and I look forward to talking to you in the weeks ahead, and hopefully being with you in person at one of the many industry events that we'll be attending the spring and summer as our industry returns to normal in the meantime enjoy your spring and we hope you'll all be out on the road this summer stay healthy.
And we hope to see you soon.
This does conclude today's Wyndham hotels <unk> resorts first quarter 2021 earnings conference call. Please disconnect. Your lines at this time and have a wonderful day.
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