Q1 2022 Wyndham Hotels & Resorts Inc Earnings Call
Welcome to the Wyndham hotels, <unk> resorts first quarter 2022 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.
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.
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 he's.
These risk 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 S E T.
We will also be referring to a number of non-GAAP measures a 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 that 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 the 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 or webcast.
With that I'll turn the call over to Jeff.
Thanks, Matt and thanks, everyone for joining us. This morning, we are very pleased to report a strong start to the year with first quarter results once again, demonstrating the value we bring to our owners.
The strength of our brands and the unconstrained demand at a leisure traveler as our domestic economy hotels achieved a record levels of Q1 occupancy rate and revpar.
We delivered $159 million of adjusted EBITDA in the first quarter, 64% more than last year and 41% more than what we delivered in 2019, and we generated $125 million in free cash flow.
More than double what we generated last year.
We grew our development pipeline, 5% sequentially and by 9% versus prior year to a record 204000 rooms.
We awarded 114, new contracts domestically and 51 contracts internationally, which in total account for more than 22000 new rooms.
The number of domestic contracts was nearly 130% more than what we awarded last year and nearly 90% more than what we awarded in 2019.
Importantly, we awarded contracts to develop the first 50 hotels for our new construction extended stay brand hotels. It will begin to break ground later this year.
Developer reaction has been overwhelmingly positive given its ultra cost efficient prototype and operating model.
For the fifth consecutive quarter, we grew our overall system sequentially closing Q1, with 200 basis points of year over year growth and 40 basis points of sequential net room growth.
We opened more than 11000 rooms globally, which was nearly 50% more than last year and in line with the first quarter of 2019 and.
And we retained over 1000 more rooms in Q1 than we did in Q1 of 2019, which has resulted in a 95% retention rate over the last 12 months.
These results were in line with our expectation and position us solidly on track to achieve our full year net room growth outlook of 2% to 4%.
Here in the United States, we grew our system size year over year by 120 basis points and by 30 basis points sequentially opening nearly 7000 rooms in the quarter. The most we've opened in the first quarter of any year.
2013.
Our U S retention rate was consistent with Q1 2019 levels running over 95% during the last 12 months.
Internationally net rooms grew by over 3% versus prior year and by 60 basis points sequentially.
Our China direct franchising business led the way with double digit net room growth followed by our Latin America, and South East Asia, and the Pacific rim regions, both growing at 5%.
We continued to launch many of our brands and countries they've never operated in before including our first la Quinta by Wyndham in China, Our first Dolce by Wyndham in Brazil, and our first Howard Johnson by Wyndham in Ecuador.
We made significant progress in continuing to simplify our business. We completed the previously communicated exit of our select service management business, resulting in no change to the underlying franchise agreement terms for the hotels transferred to C. P. L. Gs acquire Highgate holdings.
In addition, we closed on the sale of our Wyndham Grand Bonnet Creek Hotel in Orlando.
And executed a 20 year franchise agreement to keep this beautiful resort in our system at full franchise fees.
And we're also now under contract to sell our last remaining owned hotel the Wyndham Grand at Rio Mar in Puerto Rico, which we expect to also be subject to a long term franchise agreement at full fees.
We're expecting that this transaction to sell our last remaining owned hotel will close in May of this year.
Our global Revpar increased 39% year over year in constant currency, which is 96% of 2019 levels here in the United States, We continued to see strong leisure demand.
We grew revpar by 38%, which is 4% higher than 2019.
And our brands once again outpaced overall industry growth by over 650 basis points.
Weekend, Revpar exceeded 2019 levels by 10% and we did not see any meaningful impact from rising gasoline costs as occupancy for our select service brands remained steady at about 96% of 2019 levels in the weeks before.
And after the gas price increase in March.
And with a U S travel association reporting that nearly nine out of every 10 Americans are expecting to travel. This summer we expect to see continued strong drive to leisure demand throughout the summer season.
Demand from our everyday business travel segments also continued to increase in the quarter.
And infrastructure accounts, which represent the majority of our domestic business segment contributed 16% more revenue to our hotels and in the first quarter of 2021 .
Driven by the uptick in government spending.
And with the recent passage of the 1.2 trillion dollar infrastructure build by Congress, which includes approximately $550 billion in new spending that will be invested in core infrastructure projects over the next five years.
Our teams have been more focused than ever on the organizations that are contracting for the construction of U S roads bridges levees dams sports and waterways.
And encouragingly, our franchisees are already seeing steady and consistent pickup in these types of infrastructure accounts.
And these accounts made up more than half of the newly negotiated business contracts that our sales team signed this quarter.
With Wyndham rewards enrollments growing by 8% in the quarter Our award winning loyalty program now stands at approximately 94 million members.
The program's overall domestic share of occupancy continues to grow and contribute nearly one out of every two check ins for our franchisees.
With the staffing shortages, our franchisees continue to experience, we're partnering with them to identify best practices and training tools that focus on recruiting hiring and retention strategies.
And when you combine our move to digital check in and checkout with franchisee opt in services like our highly requested auto call routing technology, we're moving fixed labor costs out of their hotels and helping them improve their operating margins.
Over the past two months during our cross country Executive summit meetings with highlighted new operating guide the new strategic sourcing programs designed to further reduce on property operating costs.
But perhaps no initiative holds great promise for our small business owners than Windows digital room key.
With the launch of our highly rated Wyndham booking App, which has now surpassed 4 million consumer downloads we.
We became the first hotel franchisor to introduce at scale digital room keys embedded into our app to the economy segment, allowing franchisees to further expedite check ins and reduced staffing levels.
Importantly, windows mobile key solution allows our franchisees to upgrade their existing door locks versus having to replace those door locks altogether.
While we're in the early months from an adoption standpoint, hundreds of our franchisees have expressed interest in this labor saving technology.
Over the past several weeks of our meetings with them and we aim to lead in the economy and mid scale select service segments with the number one mobile app the checks guests into and checks them out of their room that opens their guestroom door and also provides industry, leading texting solutions to continually communicate with our guests without detracting from the checking or the <unk>.
Desk experience.
One of the major messages delivered of franchisees, who we met with this quarter was requiring all owners globally to attain a minimum level, one core certification and our Wyndham Green certification program.
By April of 'twenty twenty-three as part of our brand standard compliance something which we believe will help them further reduce their operating cost while building sustainable practices and consumer awareness recognition to help drive incremental revenue from environmentally conscious travelers.
We continue to advance our ESG efforts and just this week, we published our 2022, a ESG report, which is now posted to our corporate and investor websites.
Ah report has been prepared in accordance with the global reporting initiative standards and integrates the recommendations of the sustainability accounting standards.
Board and the task force on climate related financial disclosures.
The report highlights our commitment to operating our business in a way that is socially ethically and environmentally responsible and includes enhanced disclosures around risk management.
And finally, furthering our commitment to advancing women hotel ownership by providing enhanced training operational support and capital support we were very proud to celebrate women's history month by hosting several women owned the room events throughout March as we awarded New Hotel development contracts to women developers for projects in Colorado.
In Delaware, Texas, Virginia, Oklahoma and in Florida.
Our count on me culture built on integrity accountability, inclusiveness, caring and fun would not be possible without the ongoing support of our valuable team members, who pride themselves on making a meaningful impact on our industry on the lives of our franchisees and on all of those around them and to that end, we were extremely pleased to be recognized.
<unk> this month by Forbes magazine.
On its 2022 list of best employers for diversity, which highlights companies identified as being the most dedicated to diversity to equity into inclusion.
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 first quarter results. I'll, then review our cash flows and balance sheet, followed by an update to our 2022 outlook.
We generated fee related and other revenues at $316 million a year over year increase of 36%, reflecting global revpar growth of 39% on a constant currency basis.
In the U S. Revpar grew 38% year over year to 104% of 2019 levels.
Again by our economy brands and materially driven by ADR, though occupancy also exceeded 2019 levels now for four consecutive quarters.
This quarter, we saw particular strength at Snowbird states, such as Arizona, Florida, and Louisiana, as well as ski destinations, such as Colorado, Utah and Montana.
As we move through the spring break spring break season April month to date results are ahead of March with Revpar up 8% versus 2019, including continued strength in our economy brands with economy Revpar up 13%.
Internationally Revpar improved to 83% of 2019 levels up from 81% in the fourth quarter.
Canada improved to 94% of 2019 levels up from 91% and Latin America was at its strongest level since the start of the pandemic exceeding 2019 levels by 33%.
And China government Lockdowns caused results to soften a bit from Q4 with Q1, Revpar recovering to 71% of 2019 levels slightly down from the 77%. We saw in Q4. However, the zero tolerance policy in Shanghai has had more meaningful repercussions in early April were preliminary results during the locked.
Down period indicate revpar are now at about 30% of 2019 levels.
We're we're viewing the situation as temporary in nature and are optimistic that demand will normalize once the government restrictions are once again lifted as has been the case on numerous occasions throughout the past few years.
Yeah, Revpar improvement also moderated with Q1 recovering to 82% of 2019 levels slightly down from the 84% experienced in the fourth quarter.
While our exposure to the Ukrainian region in Russia is not material, we did see lower demand throughout the continent in February due to omicron concerns March however, recovered to 86%, which was slightly above pre omicron levels back in October or November .
Seeing a slight reversal of that trend with April month to date results tracking at less than 70% now clear.
Clearly there is a good bit of divergence in the region and something we're monitoring closely as.
As a reminder, over 95% of our EBITDA is generated from our U S operations for every point of Revpar change in the U S. We expect to see about a 3 million dollar impact to EBITDA, while China would be only 150000 and EMEA about 100000.
Adjusted EBITDA was $159 million in the first quarter up 64% versus a year ago, which includes a $14 million timing benefit from the marketing funds.
Getting revenues exceeded expenses by 7 billion in first quarter 2022, while expenses exceeded marketing revenues by $7 million last year. Excluding this impact adjusted EBITDA would have increased 46%, primarily reflecting the constant currency revpar growth of 39% and 300 basis points of margin expansion.
Our adjusted EBITDA and franchising margins, both improved versus last year, our adjusted EBITDA margin increased 900 basis points, which included 500 basis points from the marketing funds, while our franchising margin calculated on the same basis as our peers, which excludes the effects of the marketing funds increased 300 basis points to 84%.
The diluted EPS improved 164% to 95, reflecting the increase in adjusted EBITDA as well as lower net interest expense and the impact of share repurchases.
Free cash flow for the quarter was $125 million more than twice the 59 million. We generated last year. In addition, as Jeff mentioned, we exited our select service management business with C. P. L. G receiving $84 million in proceeds we also as mentioned sold the Wyndham Grand Bonnet Creek resort in Orlando for approximately $121 million based on.
Our resorts 2019, adjusted EBITDA the sale price represents a 15.4 times multiple inclusive of planned capital expenditures.
Earlier this month, we renewed we renewed our $750 million revolving credit facility extending the maturity from May 2023 to April 2027 on similar terms as the prior facility. We also closed on a new 400 million dollar five year senior secured term loan facility.
Proceeds from this new issuance were used to repay a portion of our existing term loan b facility maturing in 2025 pro forma for these transactions, we effectively extended the maturity of a quarter of the term lumpy facility by two additional years and the revolver by four additional years without any increase in interest rates on either facility.
We returned $68 million to our shareholders. During the first quarter of 2022 through $38 million of share repurchases and $30 million of common stock dividends.
We ended the quarter with approximately $1 2 billion in total liquidity and our net leverage ratio was two six times well below our three to four times stated target range. This is unusually low as our ending cash balance is inflated due to the proceeds we received in March from the C. P. L G and Bonnet Creek transaction, excluding these cash items switch.
Well eventually be deployed our net leverage ratio was two nine times.
Together with a free cash flow, we will generate this year, we expect to have just over $600 million of cash to play we plan to do so in a manner that is consistent with our stated capital allocation strategy.
Our first priority as always is to invest in that business. We are actively exploring both external and organic growth opportunities. The core tenets of our M&A strategy are for deals to be accretive from an earnings and net room growth standpoint, and complementary to our existing brand portfolio, while we've been tracking some actionable opportunities. This year nothing so far has.
Met our investment criteria. However, M&A is in our DNA and we will continue to aggressively pursue deals that fit our investment criteria.
We also expect to maintain a dividend subject to board approval with a net income payout ratio in the mid thirties and of course share repurchases will as usual be an integral element of our capital allocation strategy.
We're thinking about the split right now is that about 20% of the $600 million will fund dividend payments, while the remainder will be allocated toward investing in the business and share repurchases.
This means we'll see heavier share repurchase volumes throughout the rest of the year as compared to the 38 million. We spent in Q1 and also gives us the opportunity to redeploy the proceeds from CP LG and the owned hotel sales back into the business to replace the EBITDA.
Absent attractive opportunities to do that we would see additional allocation to share repurchase.
Now turning to outlook, we are updating our full year 2022 outlook to adjust for the sale of our two owned hotels.
As a reminder, the post exit results for the CPL Chi management business, we're already excluded from our February outlook. So there are no adjustments needed for that transaction.
We now expect <unk> related and other revenues of 1.28 billion to $1. Three 1 billion down 60 million from February outlook, reflecting the removal of the two owned hotels post L D.
Adjusted net income actually increased by 9 million to $317 million to $329 million due to the removal related depreciation expense.
Diluted EPS is now projected to increase 11 cents per share at $3 39 to $3.51 based on a diluted share count of $93 6 million, which is usual excludes any potential share repurchases and we expect capital expenditures of $40 million a reduction of $5 million as we no longer need.
To maintain these two hotels.
There are no changes to our prior outlook for adjusted EBITDA Global net room growth global Revpar or free cash flow conversion rate.
Finally, we do not expect any changes from the renewal of our revolving credit facility. The issuance of the new term loan a with a repayment of the term lumpy. However, we are all aware of the fed's intention to raise interest rates multiple times throughout the year approximately 20% of our gross debt is variable with the remainder effectively fixed accordingly every 50.
<unk> point increase in interest rates versus where they are today would result in a 2 million dollar increase in our annualized gross interest expense.
In closing our first quarter results once again demonstrated the resiliency of our brands and the strength of our business model, we have significantly simplified our business structure, allowing for a greater focus on our highly profitable direct franchising business and we strengthened our balance sheet considerably and the process. We remain steadfast in our disciplined capital allocation framework and are confident in.
Both our long term growth potential and in delivering another strong year ahead with that Jeff and I would be happy to take your questions operator.
Right.
The floor is now open for questions.
At this time, if you have any question or comment. Please press star one on your telephone keypad. 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.
Yeah.
Our first question comes from David Katz of Jefferies.
Hi, everyone. Good morning.
But thanks for all of your information.
Michel you went through some parameters on capital allocation.
And I just want to make sure we have that straight.
It sounds as though.
You know you are actively looking at some potential acquisitions, but it also sounds like those should not you know it.
On an annual basis interfere with buying back stock and you know continuing to pay dividends and so that gives us just a little bit of sense for order of magnitude is that a fair interpretation.
Good morning, David I think you Yeah, I think I think that Theres, a fair interpretation I would say we are we are focused on growing our business. So our first preference is always going to be to invest for future growth yet we're going to be disciplined we're not going to do a deal just to do with deal. It has to be the right one and.
For the right reasons, we've laid out our investment criteria and our February deck and then then in last night's deck on slide 17, so aside from asset light franchise to AD and a manageable impact on that leverage we're really looking for deals that are both accretive to earnings and to net room growth and and then complementary to our existing <unk>.
Folio, so if a deal on the market today doesn't hit those criteria then it's not the right one for us and we're going to continue to remain disciplined in that approach, but if it does.
Green Light then we would aggressively pursue it. So so we do we do expect to have over $600 million to deploy this year plus some potential leverage opportunity on top of that we want to give our teams ample time to find prospects. So we're not making a specific commitment today on buybacks, but what I can say is that we haven't seen anything yet.
That hits, our criteria and and then the <unk> that we werent able to find attractive opportunities throughout the remainder of the year than all of this capital would naturally be allocated to share repurchase which would represent a significant shareholder return moment, probably 8% or even higher based on today's market cap.
Understood and as my follow up I think you may have said.
Accretive right to earnings now just if you could elaborate a bit are we talking about immediately accretive reasonably immediately accretive or accretive and something like a year or two or three.
We want it to be accretive within the first 12 months.
Perfect. Okay. Thanks, a lot.
Thank you.
Our next question comes from Joe Greff of J P. Morgan.
Hi, good morning, guys.
Good morning, Jeff just.
Nice to see the pipeline grow 5%.
Essentially I'm guessing, it's probably better than most of the expectations from people on this call can you talk about in the first quarter the pace of new contract signings.
How much of that maybe was frontloaded when the macro was less.
Less uncertain that.
Did it slow down as we got through March and then can you talk about that both in the U S and China and then what are you seeing thus far in Q2 with.
Pipeline signings.
Sure. It was a very strong quarter, Joe as you pointed out we signed 16000 rooms, which was ahead of expectations. It was 25% over last year and 10% over 2019 Echo domestically. It was a big big piece of that our pipeline grew.
99, 9% year over year overall, but are in the U S. At a it was a little bit stronger.
But without without echo it was still strong growth in the and a low mids mid low single digits in the U S. Internationally. We are we signed 8000 rooms, which was 2% over last year.
And 7% over 2019 signings you asked about China, China actually.
Surprisingly in the first quarter signed more direct franchise deals than they did back in the quarter for quarter. One of 2019. So we were we were pleased with that and.
Is it improve both on the new construction side and on the conversion side or new construction signings, obviously with with Echo increase.
Increased quite a bit here in the U S. But also did internationally.
Yeah.
Great and then going back to capital return and M&A.
Can you guys talk about sort of.
The size of the M&A the things that you're looking at I mean, you have.
$300 million of excess cash on the balance sheet at the end of the <unk>.
750 million are available to you under the revolver.
Yeah, we have a turn of.
Leverage to get another $600 million of capacity is that sort of.
The size of the M&A that you guys are looking at.
And then just to understand.
Going forward, Michelle you made some sort of comment about buyback activity resuming.
Putting words in your mouth it some greater pace in the back part of this year relative to the <unk> can you just elaborate on that one comment that you made in your prepared remarks, and that's all for me. Thank you.
Sure sure Joe.
What I can say on on M&A is that nothing is really off the table. We look for opportunities globally, we're looking in high growth markets or in regions, where we have gaps in our portfolio. They could they could easily be bolt ons of smaller brands, where they could be large brands, if it's a strategic fit and hits, our <unk> hits our investment criteria.
Yeah with them with respect to share repurchases I think the window will open tomorrow and and then you should expect to see us and immediately step up or our volume on on repurchases.
Okay, Great and then net proceeds from the Rio Mar.
Can you give us a magnitude of that.
Oh, we're expecting Rio Mar two or two to trade close to close to its net book value.
Okay.
That number handy the net book value.
I believe it's close to about $60 million.
Great. Thank you guys.
Thanks, Joe.
Our next question comes from Danny Assad of Bank of America.
Hi, good morning, everybody.
My question is a little bit on this.
Kind of staying the same vein, but does a successful project echo rollout make the buy versus build a brand proposition any different than it would've been in the past.
A great question Danny I'm, you know I think this is our 123 fourth the brand launch ourselves versus buying a brand and you know it has become even more popular with developers and we.
We already have 6000.
Rooms in the pipeline than are our new Microtel, Moda brand, which was a brand that we did buy many years ago and became our number one new construction economy brand last year from a new construction development standpoint.
And so so I think it does I mean, we have seen significant interest.
In this brand we we had one of the largest teams we've ever had at the Hunter Investor Conference in Atlanta in March the absolute biggest team we've ever had at AR at the Asian American Hotel owners Association in Baltimore, where we had the busiest trade show Booth, we've ever had and the demand was was in.
How do I talk to Wyndham about our territory and in the ability to develop an echo.
We're we're tasking our teams to sign another 50 of these we're looking to have 100 and our pipeline by year end, we know that four will all ready break ground this year.
And our architecture design and construction teams believe that they could get those four open next year, we'll see generally a 12 to 18 month construction time, but yeah. I mean, we were hoping to have another two dozen break ground next year and would expect it to open at least 300 hotels over the next 10 years.
And I would just add to that Danny generally are the rule for buy versus build is to is to buy hotels when I'm. When they are trading below replacement cost and then to build when they were trading above replacement cost and today hotels are trading at or above 2019 levels in many markets, particularly in the chain scales that we have the most.
Does your two which which would bias owners toward toward building of course, we're seeing construction cost rise at the same time. So net net are we would say the buy versus build hasn't really changed if an owner are sitting on significant dry powder theyre going to look to deploy it immediately and and lean towards buying and if there are opportunistic and willing to wait there.
We're going to build that I'd also say rois in the hotel space are still really attractive versus other real estate asset classes.
Got it thank you.
Yeah.
Thanks Danny.
Our next question comes from Stephen Grambling of Goldman Sachs.
Hey, Thanks for taking the questions maybe another follow up just on investment and you did reference internal investment opportunities, we generally don't think of it.
The model being particularly capital intensive so would love any other color you could give on what internal investment opportunities might look like.
Well, Stephen I'm, not I don't know if I did reference in turn all our investment opportunities I think we're I think what we're saying is that we are looking for organic growth opportunities as well as as well as M&A and when we think about organic growth opportunities, which might be implied to be internal growth opportunities that would really be do we have the ability.
To to bring in a large portfolio of hotels under under a specific brand and maybe we would spend a little bit of capital to to make that happened with development advances or something of a similar nature.
Got it so that'd be more key money effectively.
Yes, that's right.
Okay. That's helpful and then maybe an unrelated follow up.
I think Joe was alluding to this a little bit but as we look at China you referenced the sharp slowdown from Lockdowns into April has that had any impact are you expecting any impact on the development or construction in the region.
You know, obviously or our operations and development teams, who are travelling where they can travel are out there traveling I mean, we opened 2400 room Stephen in the first quarter.
It was down a bit to last year in terms of our room opening activity.
Well, while we awarded the same number of contracts as we did in the first quarter of 2019 and look while the team delivered double digit net room growth. We did see some slowdown on both the the opening in and signing side.
And but China has a proven ability to quickly recover as Michel referenced.
In her remarks. This is the fourth time, we've seen a setback and a step back and we're just remind everybody that China represents about 2% of our 2021, EBITDA and Michelle because she provided the sensitivity of course of $150000 per point in their remarks.
But but our teams are still bullish we have 60000 direct franchise rooms in our pipeline right now.
And those are all direct which is just about as many direct franchise rooms as we have in the country now open so.
Look our teams are just itching to get back out there and very bullish about the the the long term prospects in the coming years.
That's helpful I'll jump back in the queue. Thank you thanks David.
Okay.
Our next question comes from Michael Bellisario of Baird.
Thanks, Good morning, everyone.
Just one more on the M&A front, maybe asked differently. If you didn't have this excess capital on hand would you be as aggressive in your pursuit of acquisition opportunities.
Yes, Michael I do think I do think we would be as aggressive but like I said, our preference is to deploy our free cash flow to grow the business and and we do generate a substantial amount of free cash flow every year. So so you'll you should always expect us to first look at our growth opportunities.
Got it thanks, just wanted to clarify that and then.
Then I would also just I would also I'm sorry, I would also just add to that of course, we do place a high value of importance on on shareholder return and we're an asset light business I think you've heard me I.
I think you've heard me say before there's no reason we couldn't do both.
Yeah.
Got it understood.
And then just.
Follow up question on fundamentals since we haven't really touched on it too much can you maybe talk about U S trends and then maybe the slight slowdown or narrowing and revpar recovery that occurred in the quarter versus <unk>, and then what youre seeing or hearing from customers in terms of the impact from higher gas prices on demand.
Sure I mean, we as we said in our remarks, we haven't seen really any measurable impact on gas results and what we're hearing.
And seeing from from customers, what we're hearing from our franchisees has nothing but optimism in terms of the trends you know Michelle touched upon how strong April that's been so far and what's impressed us and I think what's giving our franchisees just great confidence is is how strong the ADR gains are out there, we talked about and ADR gains of 8% in the first quarter and 19.
That's grown to 13% April month to date.
And April weekend 80 ours, Mike are are really impressive. So far this month are running 18% not to last year, but 2019.
I mean, we're having weekends this past Friday, and Saturday night, where certain brands likely keep that running.
You know upwards of 25% average daily rate to our 2019 so.
The trend is that our franchisees are feeling that the summer of 'twenty two could replace the summer 2021 is the best ever.
And that's certainly what they saw in the first quarter are you know three quarters of them had a higher occupancy than they did back in 2021.
Michelle and I've had the senior team we've been crisscrossing the country talking to our franchisees met with thousands of them. We are always start to show with a show of hands for how many in.
In the audience had believe they had a better 2021 and they did back in 2019.
<unk> 19, and most of the hands are up in the air and I asked them to keep their hands up if they feel that 2022 is going to be better than 2021, and most of those most of those hands us remain in the year. So you know with all of the surveys out there pointing to that continued trend of travel domestic.
Drive too we believe will continue to outperform and give our franchisees the opportunity to continue to drive drive rate and we think you know as we get into the <unk>.
Uh huh.
The summer, that's really going to resonate with our with our small business owners.
And let me just put us put in another point onto onto Jeff's remarks, if you look at our if you.
Look at Q4 levels at 104% of 2019 in in the U S and compare that to Q4 of last year. Obviously was at one O. Nine however, Q4 last year. It did benefit from a really strong December was up 15% while October and November were up 7%. So we're viewing Q1 activity sees.
Generally in line with our with the October and November performance, which is the higher demand periods.
Okay.
Got it thank you thanks.
Thanks, Mike.
Our next question is from Daniel Adam of Loop capital.
Hey, good morning, everyone. Thanks for taking the question.
Michelle I think you mentioned in the prepared remarks domestic revpar tracking 8% above 2019 levels in April .
You talk about where revpar is tracking on our global system wide basis, so far quarter to date and then when might we expect and I realize this is a very complicated.
A question on <unk>.
Something that you may not be able to answer but when might we expect to see international Revpar get back to 2019 levels.
I'll I'll start Dan and then maybe Michelle Kid. Thanks for the question fill in.
The win I mean, what we're seeing right now is is.
The first quarter ended was was a revpar improvement from 81% internationally.
In Q4 to 2019 levels to $8 83, so it picked up a couple of hundred basis points and you know where we picked up Canada improved it's almost back to where it was back in 2019 candidates in our international mix.
Latin America improved and aside from China, which Michel talked about really the only other region that slipped back just a little bit.
Was was Europe .
It slipped from 84% of 2019 levels back to 22% and that was really given sort of the year and setbacks that they had coming out of the holidays, but.
There is tremendous and growing optimism in Europe right now with all of the travel restrictions being lifted we're seeing summer booking demand and forward booking.
Business on the books growing you know all we have to do is look at what happened in the month of March with with commercial flight activity, which is really important to our hotels that have so much European outbound out of airports like Heathrow, which reported a march being seven times up from a year ago.
To to feel that this could be a much better summer.
And if we listen to all the tour and travel operators that our sales teams are dealing with over there in Europe are there. They're also remaining very optimistic.
In terms of what they're seeing and in terms of what they're reporting in terms of increased demand and capacity additions to to their routes.
Okay.
That's helpful Jeff.
Then.
Just I guess as an unrelated question.
Given the rise in interest rates that we're seeing to what extent if at all have you seen the rise in rates impact the development pipeline and.
Do you have any insight with respect to your franchisees.
How many of them in and.
To what extent there they have variable interest rate debt that they used to finance deals I'm not sure I mean, what our franchisees are telling us is that it's never been easier right now.
Throughout the start of the pandemic to the data to get financing and what we're seeing in the pipeline as a as we've talked about I mean, this was the seventh consecutive quarter of sequential.
Pipeline growth and a really strong demand I mean, if you're a franchisee right now and you could buy a piece of land I mean, most of our franchisees are believing that there's never been a better time to build a select service hotel then there than there is today given given the availability of of.
Financing and everything that Michelle touched on right now in terms of pricing in terms of how how that how that hotel. It at some point are going to trade I mean, our franchisees are feeling that they're beginning.
A cycle that hopefully is going to run another 10 years like the last cycle, they're coming off of those strongest cycle they've ever had they're they're they're leverages down their balance sheets are in much better shape and I'm I think that points to why our new construction activity is has really ticked up.
Yeah.
Great. Thanks, so much.
Thanks, Dan.
Our final question is from Ian Zaffino of Oppenheimer.
Hi, great. Thank you.
Yeah. Thanks for the color on your trucks your bill.
With you guys, maybe be able to kind of help us out with maybe the P&L impact of the infrastructure Bill and maybe how would flow through and you know any other type of color there would be really helpful. Thanks.
Great question, Ian within our teams have been doing a lot of work on it and I'll turn it over to Michele to talk about the P&L impact but.
Our franchisees and our sales teams could not be more excited about about what's coming I mean, we have one of the things we made sure not to do during the pandemic was was was say goodbye to our our best franchise.
<unk> global sales and field sales teams and we were able to retain them.
And not only that we're adding more of those salespeople to our GSO and field sales teams today to sign accounts, who we know will be contracting for this this really important work and as we said in our prepared remarks, we're winning more bids were gaining more midweek sure. It's been a big piece of why we've actually been able to grow.
Our Revpar index more in the mid week.
This quarter, I think 440 basis points versus 2019.
Because of the traction that we're getting from these every day business travelers over half of our negotiated corporate business accounts that we signed in the first quarter where infrastructure related.
And what we saw was not only the 16% increase that we talked about versus prior year, but that same double digit increase versus 2019, but I'll, let michelle touched upon the.
How that might flow through Michelle.
Sure happy to good morning, Ian I would say that the bill is calling for an incremental $550 billion of spend over the next five years and so if you just annualize that.
Break it down literally I would say that's a doubling of an annual federal infrastructure spend we're generating about $15 million of royalty today from U S. Federal infrastructure spend so we think there's an opportunity to double that contribution but that would assume that the spend the new spend doesn't displace any existing spend.
At the state local or even federal level in reality Labor is limited. So we would expect some displacement and think it's probably reasonable to discount for that of course also it wouldn't be unreasonable to assume that the total the total spend could extend beyond the targeted five years, which would mean.
We could see less incremental spend deployed annually and then that would further lower this amount. So I think at the end of the day I wouldn't take the $15 million to the bank until we have until we have further clarity from the government about how and when they they intend to deploy.
That spend but I think that helps at least size the magnitude of the opportunity for us at least at the very high end and before reflecting any of those risk factors I mentioned.
Okay, Great and then.
Actually really helpful.
Can you also talk maybe about the rate environment I know you've been talking a lot about ADR.
You're pumping up against any elasticity is there.
Have you looked at that as far as you know running maybe surveys or kind of customer feedback and you know.
How much higher can we continue to push pricing and how much availability is there.
Well I mean, if we look at every survey and that's out there I mean from a M. M. G Y to the U S. Travel survey I referenced I think you know it right.
Right now it is.
We're seeing things, we've never seen before Americans or are ready to travel it at levels that are the highest that have ever been tracked ever been surveyed since the onset of Covid I mean, 91% in the most recent U S. Travel survey are saying that they plan to travel in the next six months and again, we believe that domestic drive to desk.
The nations will continue.
<unk> to outperform and continue to give our franchisees the opportunity to to drive rate I'd also say one of the things that we do spend time on is looking at the gaps that are still out there between our segments and what the alternatives are for consumers who are looking to get away. This summer in the $40 gap between the <unk>.
Economy in the upper mid scale segments that we saw at the end of the year. That's that gap has actually widened its grown to $48 and it's even more extreme between between the upper mid scale in the upper upscale in terms of what your options are if you're trying to find out find a hotel to vacation at this summer or this fall it was a $70 gap.
That's that's widened to $84. So I mean, it is providing our by Wyndham economy, and Midscale select service brand owners. The opera the ability to continue to grow continue to to to to raise rates as they provide a more upscale experience at.
It economy, and Midscale full service hotels, our select service hotels.
Alright, well, thank you very much for the color guys.
Ian.
This does conclude the question and answer portion of our conference I'd be happy to return the call to Geoff <unk> for any closing remarks.
Thanks, Leo and Thanks again, everyone for your time this morning, Michele Matt and I very much appreciate everyone's continued interest in Wyndham.
We look forward to talking with you and hopefully seeing many of you in person someday soon have a great day everyone.
Okay.
Thank you. This does conclude today's Wyndham hotels <unk> resorts first quarter 2022 earnings Conference call. Please disconnect. Your line at this time and have a wonderful day.
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