Wyndham Hotels & Resorts, Inc. (WH) Earnings

Management highlights

- CEO Health Update * CEO Geoff Ballotti is receiving treatment for multiple myeloma, reports great care, remains actively engaged in work, and is optimistic about his treatment path * thanked analysts and investors for their messages of encouragement - Demand and Operating Trends * U.S. demand momentum accelerated from May through June 2026, and strong leisure and everyday business travel trends continued into July 2026 * Large U.S. states (Texas, California, Florida) accounting for 25% of U.S. room count improved 700 bps sequentially from down 3% in Q1 to up 4% in Q2 * Infrastructure-related project demand from transportation, AI, data center, and industrial projects continues to boost midweek occupancy for hotels in project-adjacent markets, driving outperformance in the industrial Midwest (Illinois/Indiana +10%, Iowa +9%, Wisconsin +7%, Ohio +6%) - Technology and AI Innovation * Wyndham Connect, the AI-powered guest engagement platform built on a Wyndham-trained large language model (LLM), is now rolled out internationally to over 5,000 hotels, autonomously selling upgrades, amenities, and services to generate incremental revenue for franchisees * Wyndham AI Concierge (previously Wyndham Connect Plus), the premium voice-enabled add-on, is also expanding internationally, delivering over 500 bps higher direct contribution by autonomously handling reservations and guest inquiries, reducing franchisee labor costs, and increasing conversion * AI-powered LLM integration for direct bookings drives a 20% higher conversion rate on brand.com compared to third-party channels, with 260,000 average daily guest interactions across AI tools - Loyalty Program Enhancements * In partnership with Barclays, Wyndham re-launched its Wyndham Rewards credit card portfolio with four targeted products (no-fee, premium, business, elite/ultra-premium) to expand reach to higher-value travelers; the new ultra-premium Earner Premier card offers significant benefits including a 120,000-point welcome bonus and automatic Diamond status * Wyndham Rewards was named the number one hotel rewards program by U.S. News & World Report; global membership grew 9% YoY to over 126 million, with the program accounting for more than half of all domestic check-ins * The program will expand from 3 to 4 redemption tiers in September 2026: free nights will start as low as 5,000 points (down from 7,500 previously), while the most aspirational properties will move to 45,000 points. The core fixed-price, no dynamic pricing structure will remain unchanged to preserve the program's simplicity - Capital Return and Balance Sheet * Returned $86 million to shareholders in Q2 ($54 million in share repurchases, $32 million in dividends); year-to-date, 1.3 million shares have been repurchased for $105 million * Ended Q2 with $1 billion in total liquidity, and a net leverage ratio of 3.5x, the midpoint of the company's target range; up to $170 million in excess capital is available for share repurchases or M&A in H2 2026 after accounting for dividends and planned development advances

Guidance

- Revised U.S. RevPAR growth guidance for full year 2026 upward from flat to up 2%, reflecting stronger than expected Q2 performance and carryover momentum into H2 2026. The 2% H2 growth is expected to be two-thirds driven by ADR and one-third driven by occupancy, consistent with Q2 trends - Raised full year 2026 global RevPAR growth guidance to flat to +1%, an increase of 100 bps at the lower end of the range, incorporating weaker Q2 performance in China and the Middle East - Maintained full year 2026 net room growth guidance at 4% to 4.5% (excluding REVO) - Raised the lower bound of full year 2026 net revenue guidance to $1.48 billion to $1.5 billion (up $10 million at the low end) - Raised the lower bound of full year 2026 adjusted EBITDA guidance to $735 million to $745 million (up $5 million at the low end) - Maintained full year guidance for a marketing fund break-even, with a $5 million underspend in H1 expected to be offset by an equal overspend split evenly between Q3 and Q4 - Full year 2026 adjusted diluted EPS is projected at $4.71 to $4.83, based on a diluted share count of 75.4 million - Most of the remaining year-over-year comparable adjusted EBITDA growth is expected to occur in Q4 2026, driven by lapping one-time variable cost reductions from Q3 2025 (this growth outlook excludes marketing fund variability) - Full year 2026 ancillary revenue growth is expected to be low to mid-teens, implying acceleration from the 12% year-to-date pace in H2 2026 - Long-term guidance remains unchanged: mid-to-high single-digit EBITDA growth, 2% to 3% annual RevPAR growth, 4% to 5% annual net room growth, and high single-digit annual ancillary revenue growth - No changes to guidance for development advance spending or free cash flow conversion

Segment performance

Domestic: U.S. RevPAR grew 2% year-over-year, with demand up 60 bps and ADR up 160 bps. RevPAR improved 200 bps sequentially from Q1, outperforming management's 1% growth expectation. Net room growth was positive sequentially, with strong conversion and new construction openings in higher chain scale segments, contributing to a record domestic pipeline of 110,000 rooms. International: Global RevPAR was down 1% year-over-year in constant currency. Canada RevPAR grew 2%; EMEA RevPAR declined 6% (driven by a 45% RevPAR drop in the Middle East and ongoing underperformance of the insolvent REVO portfolio; excluding REVO and the Middle East, EMEA RevPAR grew 5%, with strength in Spain (+26%), Turkey (+16%), India (+11%), and Africa (+11%)); Latin America RevPAR declined 7% (driven by soft U.S. inbound travel to Mexico; excluding Mexico, the region was flat, and July 2026 RevPAR in Mexico is already up 5% month-to-date); Southeast Asia and Pacific Rim RevPAR grew 5% led by Vietnam, Thailand, and New Zealand; Wyndham's China RevPAR was flat sequentially (down 5% YoY), outperforming the industry's 400 bps sequential decline, with 13% net room growth across mainland China. Development: Opened a Q2 record of nearly 18,000 rooms, up 7% YoY. Net room growth was 10% (excluding REVO) in EMEA, 12% in Latin America and the Caribbean, 10% in Southeast Asia and the Pacific Rim, and 13% in mainland China. The total development pipeline grew for the 24th consecutive quarter to a record 261,000 rooms across 60+ countries, with a 30% fee per available room (fee par) premium over the existing system, reflecting a shift to higher chain scale properties. Financial overall: Q2 2026 net revenues were $375 million (down 6% YoY), adjusted EBITDA was $212 million (up 3% YoY on a comparable basis neutralizing marketing fund impacts), and adjusted diluted EPS was $1.48 (up 3% YoY comparable). Ancillary revenues grew 4% QoQ and 12% YoY year-to-date. Free cash flow was $105 million in Q2 and $169 million year-to-date.

Risks & headwinds

- The ongoing insolvency of the REVO portfolio in Germany has led to continued underperformance, with the majority of REVO rooms expected to terminate in Q3 and Q4 2026; management has remained disciplined on capital for further investments in the portfolio - Geopolitical and macro weakness in the Middle East resulted in a 45% Q2 RevPAR decline, though the region represents less than 1% of Wyndham's total system, limiting overall impact - Soft inbound travel to Mexico pressured Latin America RevPAR in Q2, though July performance has improved to positive 5% month-to-date - A small uptick in room deletions (ex-REVO and legacy discontinued brands) has occurred, driven by proactive pruning of lower-quality, lower fee par rooms, though management expects lower deletions and higher openings in H2 per historical seasonality - New competing select service brands have emerged, but management notes less than 1% of departing rooms reflag to these competitors, so the impact is not material to development growth

Analyst Q&A

• Q: How sustainable is the surprisingly strong U.S. RevPAR growth, and what supports the long-term trajectory? /

  A: Management believes the strength is sustainable, led by solid financial health for Wyndham's core middle-income consumer, with robust wage growth and improving deposit balances even for lower-income households. Easy comparative statistics will continue through the second half, with 2025 comps declining from -4% in Q2 to -5% in Q3 to -8% in Q4. Additional supporting factors include steady booking metrics, lengthening average stays, expected incremental consumer travel spending from second half tax refunds (estimated $4 billion in extra domestic travel spending), and ongoing growth in infrastructure-related business demand that has boosted weekday RevPAR by 250 bps from Q1.

• Q: Higher room deletions in H1 (ex-REVO) have raised concerns; how much is proactive pruning, and is unit growth on track for H2? /

  A: Higher H1 deletions are consistent with historical seasonality, and the elevated level this year is partially driven by proactive portfolio pruning to replace lower-quality, lower fee par rooms with higher-quality accretive properties. Management has improved system retention to 95% globally, with a target of 96% driven by record guest and franchisee satisfaction, especially for economy brands which have seen large gains in net promoter scores. New competing brands have had no material impact, with less than 1% of former Wyndham rooms reflagging to competitors, and management remains on track for strong H2 net room growth after record H1 domestic openings.

• Q: What is the geographic and brand breakdown of portfolio pruning, and where is Wyndham targeting new growth? /

  A: There are no specific underperforming brands targeted for broad pruning; the company is just focused on systematically replacing lower fee par properties with higher quality conversions and new builds. Internationally, Wyndham sees massive untapped growth opportunity across markets, while domestically it has gained meaningful share in conversion segments: upper mid-scale conversion share has doubled to 25% pre-pandemic, upscale conversion share has grown from 4% to 8%, and economy conversion share has increased from 44% to 63%. High-performing growth brands include Baymont, Hawthorne Suites, and La Quinta (which tripled domestic conversions in Q2).

• Q: What are the biggest AI opportunity areas Wyndham is pursuing, and are any initiatives needing a reset? /

  A: No major initiatives require resets; management highlights three high-impact areas. First, integrating AI LLMs into direct booking drives 20% higher conversion than third-party channels by providing real-time, accurate inventory and rate information. Second, Wyndham Connect AI guest engagement is live at 5,000 hotels, driving up to $100,000+ incremental annual revenue per engaged franchisee from autonomous sales of upgrades and add-ons, with 260,000 daily guest interactions. Third, Wyndham AI Concierge handles voice and text reservations and inquiries autonomously, reducing franchisee labor costs and delivering 500 bps higher direct contribution and 15% higher ADR for autonomous bookings compared to phone bookings.