Wyndham Hotels & Resorts, Inc. — 2021 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2021. The filing is an annual Form 10-K rather than a standalone fourth-quarter report; fourth-quarter items are identified where disclosed. Wyndham is an asset-light hotel franchisor with approximately 8,950 affiliated properties, 810,100 rooms, 22 brands and operations in approximately 95 countries. Only two hotels were owned at year-end.
Business context and operating performance
- The business is organized into Hotel Franchising and Hotel Management segments. Franchising is the core, higher-margin business.
- Global rooms increased 2% to 810,100, including 1% growth in the United States and 4% internationally.
- Global RevPAR increased 47% to $35.95 and recovered to 88% of 2019 levels on an annual, constant-currency basis. U.S. RevPAR recovered to 97% of 2019 levels; international RevPAR recovered to 67%.
- The development pipeline reached more than 1,500 hotels and 194,000 rooms, up 5% from 2020. The Company awarded 655 new contracts and reported global retention above 95%.
Financial results and key metrics
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Net revenues | $1,565 million | $1,300 million | 20% |
| Fee-related and other revenues | $1,245 million | $950 million | 31% |
| Operating income/(loss) | $446 million | $(46) million | +$492 million |
| Net income/(loss) | $244 million | $(132) million | +$376 million |
| Diluted EPS | $2.60 | $(1.42) | Improved |
| Adjusted EBITDA | $590 million | $336 million | 76% |
| Cash flow from operations | $426 million | $67 million | +$359 million |
| Capital expenditures | $37 million | $33 million | +$4 million |
- Adjusted EBITDA recovered to 95% of 2019 levels. Hotel Franchising adjusted EBITDA increased 51% to $592 million, while Hotel Management adjusted EBITDA increased to $57 million from $13 million.
- Operating margin was approximately 28.5% in 2021, compared with negative 3.5% in 2020. Adjusted EBITDA margin was approximately 37.7%, compared with 25.8% in 2020.
- The 2021 results benefited from the absence of the $206 million of impairment charges and $34 million of restructuring charges recorded in 2020. The Company recorded a $6 million impairment charge in 2021 related to its planned hotel sales.
- Interest expense decreased to $93 million from $112 million. The Company recorded an $18 million early-extinguishment charge following redemption of its $500 million 5.375% senior notes due 2026.
Balance sheet, debt and liquidity
- Cash and cash equivalents were $171 million, compared with $493 million at December 31, 2020. Total debt declined to $2.084 billion from $2.597 billion.
- Debt consisted primarily of a $1.541 billion term loan due 2025 and $493 million of 4.375% senior unsecured notes due 2028. The $750 million revolving facility had no borrowings and $735 million of available capacity after letters of credit.
- The Company reported more than $900 million of liquidity, remained in compliance with its debt covenants and reported an annualized first-lien leverage ratio of 2.2 times versus a 5.0-times maximum.
- In 2021, the Company paid $83 million of dividends and repurchased approximately 1.4 million shares for $110 million. Remaining repurchase authorization was $81 million at year-end. The Board subsequently increased authorization by $400 million in February 2022.
- Management expects approximately $45 million of 2022 capital expenditures and approximately $55 million of 2022 development advance note funding.
Material changes versus prior periods
- Travel demand and hotel profitability substantially recovered from the COVID-19 downturn, particularly in U.S. economy and midscale brands.
- The Company redeemed its higher-cost 2026 notes, effectively extending $500 million of maturity by approximately 2.5 years and lowering the interest rate by 100 basis points relative to the 2026 notes.
- The Board approved the sale of the two owned hotels, resulting in $154 million of assets and $17 million of liabilities classified as held for sale and a $6 million impairment charge.
- Wyndham agreed to terminate its remaining CorePoint hotel-management contracts upon CorePoint’s sale to Highgate, expected in the first quarter of 2022. Wyndham expects an approximately $84 million termination fee, while the franchise agreements are expected to remain in place.
- The Company introduced Registry Collection Hotels, its first luxury brand, and Wyndham Alltra, its first all-inclusive brand, during 2021.
Outlook, risks and unusual items
- For 2022, management targeted net room growth of 2% to 4%, approximately 95% global retention, development of an economy extended-stay brand, completion of the select-service management exit and sale of the two owned hotels.
- Management stated that it did not expect COVID-19 to materially affect operations further, but warned that a resurgence, new variants or renewed travel restrictions could reduce demand, cash flow and liquidity and could trigger additional impairment charges.
- Key risks include hospitality and economic cycles, labor and inflationary pressures, international travel restrictions and foreign exchange, competition from other franchisors and alternative lodging, franchisee financial distress, cybersecurity and privacy incidents, climate-related events, and dependence on key relationships.
- CorePoint represented approximately 20% of total revenue in 2021 and approximately 8% excluding cost-reimbursement revenue. CorePoint accounted for approximately 60% of managed hotels, creating concentration and transition risk.
- The Company disclosed approximately 35 pending sex-trafficking-related matters. It had $6 million of legal accruals and stated that potential adverse outcomes could aggregate to approximately $5 million above recorded accruals, although litigation outcomes remain unpredictable.
- The Company provided approximately $127 million of post-closing credit support guarantees related to the former Parent’s European vacation-rentals business; the reported fair value of those guarantees was $61 million.
- LIBOR-based borrowings and interest-rate swaps will require transition to replacement benchmarks. Management anticipated using SOFR for an amended and extended revolving facility during the first half of 2022.
Important facts for investors to verify
- Confirm that the CorePoint-to-Highgate transaction closed and that the approximately $84 million termination fee was received.
- Track the timing and proceeds from the sale of the two owned hotels and the resulting reduction in management exposure.
- Reconcile adjusted EBITDA to GAAP net income; adjusted EBITDA is a non-GAAP measure and excludes impairment, interest, taxes and other items.
- Monitor global and international RevPAR recovery relative to 2019, net room growth, pipeline conversion and retention rates.
- Review debt maturities, covenant compliance, refinancing plans, LIBOR-to-SOFR transition effects and interest-rate exposure.
- Assess the potential financial and reputational impact of COVID-19 resurgence, franchisee distress, litigation, cybersecurity events and the disclosed guarantees or indemnities.
- Review Wyndham Rewards deferred revenue and liability assumptions; the loyalty liability increased to $109 million from $81 million and relies on estimated redemption rates and costs.